Chris LeeFollow

Abstract

This paper examines the economic history and market dynamics of cocoa production in Ghana and Côte d'Ivoire. Together, these countries produce over 60% of the world's cocoa and dominate global supply through their marketing boards. The boards of COCOBOD (Ghana) and Le Conseil du Café-Cacao (Côte d'Ivoire), established during colonial rule to stabilize prices and extract surplus production value, now collaborate as the Côte d'Ivoire-Ghana Cocoa Initiative (CIGCI) — purportedly to improve producer income through a \$400 per ton price premium called the Living Income Differential (LID). The LID works to stabilize prices and improve farmer incomes by leveraging the CIGCI's collective bargaining power. Our first chapter explores the historical development of production and concentration in the cocoa sector, illustrating how institutional developments have contributed to the stratification of producers. Our second chapter applies the dominant firm model of price leadership proposed by Stigler in 1965 to cocoa production for the first time, and incorporates game theory to explore how the LID can incentivize cooperation among member states while deterring market entry by non-members and price erosion from increased competition. We theorize that while the LID provides short-term benefits to farmer income, structural challenges such as uneven profit distribution, inefficiencies in the cocoa value chain, and potential entry by fringe producers could undermine its long-term impact. To assess our hypothesis, we apply a Difference-in-differences (DiD) model to analyze farmgate prices as a proxy for farmer income, and find that even in the short run the LID fails to deliver improvements to farmer income. This is further reinforced by our analysis of sourcing data, which revealed that Côte d'Ivoire's exports saw a substantial relative decline after the introduction of the policy. While our research is critical of the LID's implementation, it also reinforces its significance — mainstream improvements to farmer income will require policies that disrupt the imbalance in bargaining power and market concentration of the cocoa industry.

Advisor

Moledina, Amyaz

Department

Economics; Global and International Studies

Publication Date

2025

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

Download

Share

COinS
 

© Copyright 2025 Chris Lee