Welfare effects of groundnut pricing in the Gambia

This article reviews the welfare effects of two extremes of groundnut pricing policy during the 1980s and argues that not only were the taxes and the subsidies large relative to rural incomes, but the efficiency losses were also significant, particularly in the case of the 1983/1984 tax. After a description of the groundnut sector, the impacts of taxes and subsidies on the welfare of producers are presented in a partial equilibrium framework and an analysis is made of the effects on the national economy. The article concludes with observations on groundnut pricing policy in The Gambia and its implications for policy makers.