Abstract
This paper is a case study of the investment (planting) decisions in the Bahia cocoa sector in the period 1966–1985, with a special focus on the role of producer prices and investment subsidies. The study deals separately with replanting decisions and new planting decisions using aggregate time series data and exploits several concepts of vintage production models. The results of the analysis show that the dynamic response of replanting and new planting to changes in profitability and to interest subsidies is significantly different, and that the latter played a very important role in the successful rejuvenation of the cocoa sector over this period.
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