Biofuels, poverty, and growth: a computable general equilibrium analysis of Mozambique

Posted on May 30, 2009

This paper assesses the implications of large-scale investments in biofuelsfor growth and income distribution. We find that biofuels investment enhances growthand poverty reduction despite some displacement of food crops by biofuels. Overall, thebiofuel investment trajectory analyzed increases Mozambique’s annual economic growthby 0.6 percentage points and reduces the incidence of poverty by about 6 percentage pointsover a 12-year phase-in period. Benefits depend on production technology. An outgrowerapproach to producing biofuels is more pro-poor, due to the greater use of unskilledlabor and accrual of land rents to smallholders, compared with themore capital-intensiveplantation approach. Moreover, the benefits of outgrower schemes are enhanced if theyresult in technology spillovers to other crops. These results should not be taken as agreen light for unrestrained biofuels development. Rather, they indicate that a carefullydesigned and managed biofuels policy holds the potential for substantial gains.

Arndt, Channing & Benfica, Rui & Tarp, Finn & Thurlow, James & Uaiene, Rafael, 2010. “Biofuels, poverty, and growth: a computable general equilibrium analysis of Mozambique,” Environment and Development Economics, Cambridge University Press, vol. 15(01), pages 81-105, February.

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