The Elimination of Madagascar’s Vanilla Marketing Board, Ten Years On

Laure C. Dutoit, University of Lausanne, Switzerland
Olivier Cadot, University of Lausanne, Switzerland
Jaime de Melo, University of Geneva, Switzerland

Abstract

This paper explores how the elimination of Madagascar’s Vanilla Marketing Board (VMB) in 1993 affected prices paid to farmers, incentives, and regional indicators of poverty and inequality. After steadily losing market share, Madagascar has been able to regain some of the lost ground since the mid-1990s. Margins between FOB and farmgate prices have narrowed down and analysis of changes in poverty and inequality suggests some positive impact in regions where vanilla is grown, though it is difficult to control for other intervening factors. A counterfactual analysis based on a model of Cournot competition between vanilla traders suggests that whatever limited increase in competition resulting from the elimination of the VMB has contributed to raise purchase prices and the cash income of vanilla farmers. However the effect on farmers' consumption remains small because a large part of it is self-consumed. After taking into account the reduction in Madagascar's monopoly power on the world vanilla market implied by the elimination of the MB, the induced rise in producer prices is estimated to have lifted about 20,000 individuals out of poverty.