Abstract

Possible Consequences for Coffee Consumption in the German Federal Republic of a Lowering of Coffee Duties.— The extremely high German coffee duties, amounting today to almost a hundred per cent of average import value of raw coffee, have given rise to the question whether a lowering, or even the complete abolition, of coffee duties would bring about an appreciable increase of coffee consumption and, consequently, coffee imports into the German Federal Republic. So the present paper, which brings up to date a study of 1963 under the same heading, presents an econometrical analysis (based on the period from 1950 to 1968), by means of the reaction relations resulting from which it is attempted, on the one hand, to ascertain the price elasticity of coffee demand, and on the other, to estimate the consequences of a lowering, or total abolition, of coffee duties. On the whole, the results of the present study confirm those found in 1963: Given the present behaviour of consumers, coffee demand in the German Federal Republic must be regarded as price inelastic (i.e., ηp≪ ¦o.5¦). Consequently, price lowering would spell profit lowering in the coffee trade. Any lowerings of coffee duties would, therefore, always be passed on directly and not be absorbed by the trade margin. And a total abolition, for instance, of coffee duties in the German Federal Republic in 1968 would have lowered coffee retail prices by only 29.9 per cent, while increasing coffee consumption by only 9.2 per cent. Which would mean that a loss of 1,044 million DM (coffee duty proceeds in 1968) on the one hand, would have been offset by an import increase of only 99 million DM on the other.

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