APPP Working Paper No. 24. Beyond farmers’ taxation: A second-best perspective on cotton sector reforms

Abstract

Building on Dani Rodrik’s critiques of donor ‘best practice’ approaches, this paper examines the case of cotton sector reform in Benin, Burkina Faso and Mali, to argue that policies for African agriculture should be less focused on removing policy distortions, and adopt instead a ‘second best’ approach. Our evidence suggests that: (i) in these three major producing countries, taxation of cotton farmers has declined more than is usually assumed, and (ii) the push for orthodox economic reforms has been ineffective and often counter-productive. Donor and IFI recommendations on privatising parastatals, liberalising markets and rationalising actors’ incentives have taken insufficient account of widespread market, institutional and policy failures which make first-best outcome unattainable. Donors should resist the temptation to concentrate efforts on reducing inefficiencies, and instead support more differentiated interventions that on current evidence would benefit farmers, and reduce rural poverty, more reliably. Rather than regarding actual reforms as falling short of some unattainable efficiency standards, it would be more constructive to work within, and learn from, given contexts