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Working Paper

Policies, Prices, and Poverty : The Sugar, Vegetable Oil, and Flour Industries in Senegal

HARMONIZATION RETAIL PRICE MARKET STRUCTURE SUBSTITUTION RED TAPE PRICE DISTORTIONS PRICE INCREASES STOCK SALES INCOME INTEREST PRIVATIZATION EXCHANGE PRICING SCHEME CONSUMER GOODS PRICE SETTING DOMESTIC MARKET DEVELOPING COUNTRIES PRODUCER PRICES BLACK MARKET WORLD DEVELOPMENT INDICATORS MARKET SHARES DEVALUATION WORLD MARKETS PRICE MECHANISM PRICING DOMESTIC PRICE SUBSIDY MARKET FAILURE PRICE TAX GOVERNMENT INVOLVEMENT BINDING CONSTRAINTS SAVING BANKRUPTCY FREE TRADE PROVISION OF CREDIT DEVELOPING COUNTRY RETAIL FIXED RATE PUBLIC POLICY INTERNATIONAL COMPETITIVENESS COMMERCE MARKET REFORMS CURRENCY LOCAL BANKS BRANDS ECONOMIC CRISES CONTRACT ENFORCEMENT DEBTS OPPORTUNISTIC BEHAVIOR SURPLUS PRODUCTS ADMINISTERED PRICES COST OF LIVING MONOPOLY MARKET LIBERALIZATION DEBT MARKETING MARKETS TAX BREAKS COMPETITIVE MARKET PRODUCT MARKETING BOARDS INVENTORIES SUBSIDIES LIBERALIZATION MARKET PRICE TAXES FINISHED PRODUCT EXPENDITURE PRICING MECHANISM EQUITY DEREGULATION INVESTORS SURPLUSES SUBSTITUTE TAX RATE GOVERNMENT INTERVENTIONS DOMESTIC MARKETS INTERNATIONAL TRADE MARKETING BOARD VOLATILITY TRANSPARENCY BARRIERS MARKET FAILURES PRICE ADJUSTMENTS FUTURE MARKET PRICES PRICE COMPARISONS VALUE COMPETITIVENESS SHARE OF WORLD OUTPUT PRODUCER PRICE FREE MARKET PURCHASING POWER DEMAND CONSUMER PRICE INCOMES PRICE FLUCTUATIONS TAX RATES SALE SHARES MARKET TRADE DEFICITS RETAIL PRICES SMALL COUNTRY MARKET COMPETITION OUTPUT ENFORCEMENT REGIONAL INTEGRATION ECONOMIC DEVELOPMENT TRADE INTERESTS FOREIGN COMPETITION DOMESTIC PRICES MARKET SHARE BLACK MARKETS STOCKS BUSINESS CLIMATE INVESTMENT PRICE CEILINGS SHARE BANKRUPTCIES INVESTMENT CLIMATE ECONOMIC CRISIS MONOPOLIES SUPPLY PURCHASING COMPETITIVE MARKETS MARKET POWER INVESTMENTS WORLD TRADE CONSUMER PRICES INVISIBLE HAND COMMODITIES PRICE CONTROL PRICE CEILING PRIVATE SECTOR GROWTH PRICE CONTROLS COMMODITY PRICES COMMODITY WORLD MARKET SMALL ECONOMY PRICES MARKET FORCES POVERTY ALLEVIATION GOVERNMENT INTERVENTION COMPETITION
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World Bank, Washington, DC
Africa | Senegal
2015-07-14T21:26:22Z | 2015-07-14T21:26:22Z | 2015-06

Like many countries in Sub-Saharan Africa, Senegal has struggled to develop its industrial sector in the face of import competition. For basic food products, there is an implicit trade-off between the objectives of maintaining employment and lowering the cost of living, both of which figure prominently in current government policy. Conflicting pressures have led to a rather inconsistent policy mix of high levels of protection with price ceilings. The products of the three industries examined here—sugar, vegetable oil, and flour—account for roughly 14 percent of the consumption basket of the poor, so distortions in their prices can have a significant effect on poverty reduction. This paper compares domestic prices in Senegal with world prices since 2000, and then explains the difference by examining the protection enjoyed by these industries, along with their market structure. The analysis finds that high protection and market power have resulted in domestic prices which were often two or three times the equivalent world price. Tightening of price ceilings and some liberalization have taken place recently, but consumers have continued to pay above world prices for sugar and edible oil in 2014. The paper estimates that if this differential were eliminated, the purchasing power of households around the poverty line would increase by 3 percent, 227,000 people would move above the poverty line, and the national poverty rate would drop by 1.9 percentage points. The cost to consumers far exceeds the total wage bill paid by these industries. Further liberalization of these industries is recommended, along with phasing out price controls and shifting government policy from protecting traditional enterprises to the promotion of new export-oriented ones.

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