Earn a living? What the Côte d’Ivoire–Ghana cocoa living income differential might deliver on its promise

Abstract

Despite the high value of the global chocolate market and the high profitability of the few multinational companies dominating it, the farmers growing cocoa beans remain poor. To change this, the two biggest cocoa producers, Côte d’Ivoire and Ghana, have jointly introduced the cocoa Living Income Differential (LID) policy. Charging higher prices for beans, the policy might help mitigate both poverty and the serious child labour and deforestation issues associated with cocoa farming, for which poverty is regarded as a root cause. Nevertheless, the design of the policy and the current lack of complementary measures raise doubts about the success and longevity of the policy and concerns about the implications for farmers in other countries. Accounting for the repercussions with international cocoa markets, this study quantifies the magnitude of the policy’s effects in the LID countries and elsewhere under several alternative configurations of policies and market reactions with the support of model simulations and finds increases in farmer income ranging from zero to sizeable. Discussing the policy’s potential impacts in the past and present context of the cocoa industry, it identifies a number of issues threatening its sustainability. Moreover, it underlines the strong dependence of the policy’s success on chocolate manufacturers’ support unless complemented by supply management measures. Such measures could limit the aggravation of, or even improve, the income situation for farmers elsewhere and the child labour and deforestation issues.