Micro-Macro Economic Analysis of 'Khat' Production in Ethiopia
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Date
2004-06
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A.A.U
Abstract
Most studies on the plant khat (catha ed uli s) -the mild stimulant cash crop- focus on
description of the social behavior, health imp lications and psycho logical effects on
consumers. Due to this most policy actions taken in this regard are one sided since they
neglect the economic contribution of khat. The present study tried to describe the
economic role of khat in Ethiopia. Graphs and tables are used fo r this purpose. Resu lts
indicate that khat is clearly an important cash crop i.e. as a so urce of fore ign exchange,
so urce of tax revenue to the government and creating employment opportunity both to the
fanners and urban dwellers. Thus, it is recommended that policy makers should take into
consideration the economic role of khat to understand the impact of alternative policy
packages and/or extern al shocks that may have an effect on income/employment of
individual khat producers and on the whole economy.
The study also assesses the supply elastici ty of khat with respect to its own price and price
of food crops (teff, wheat & maize) and coffee, so as to examine its relationship with food
crops and coffee. Besides labor and fe rtili zer, non- price factors such as land and animal
power are also included as explanatory variab les. The methodology applied, whi ch is
firmly rooted in neo-class ical theory, deals with the est imation of profit (dual of the
production jimction), supply and input demand funct ions; the parameters are mainly based
on cross-farm var iation. A cross-section seco nd ary data from the 5th round of the
Ethiopian Rural household Survey held in 1999 is used to present empirical estimates.
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Keywords
Economic Analysis Of 'Khat'