The Effect of Liberalization on Grain Prices and Marketing Margins in Ethiopia

This report analyzes the effects of grain market reform in Ethiopia on grain prices and price spreads between major wholesale markets. The experience of Ethiopia during the 1990s represents a case in which a relatively consistent and internally-driven program of grain market liberalization has been pursued with the general approval of international lenders and donors. The state marketing board, while not abolished, has been substantially downsized and has become a marginal actor in the current grain marketing system. Hence, the case of Ethiopia between 1990 and 1997 may constitute a particularly important test of the hypothesis expressed by reform advocates that the removal of regulatory constraints on private trade and the transition to a market-oriented system would reduce grain marketing costs and pass along benefits to both farmers and consumers.