Specifying and Testing an Equilibrium Displacement Model of the Coconut Market in Sri Lanka

Abstract

The focus of this study is to develop an economic modelling framework for the coconut industry in Sri Lanka using the equilibrium displacement modelling approach. This is necessary for two main reasons. With the industry shifting from an export oriented industry to a domestic industry and coconut yield becoming highly variable due to climatic factors, a number of government interventions have been implemented according to market conditions. There are a few previous studies which have assessed the impact of these measures on individual industry sectors. However, there is no economic framework to undertake the assessment of various policies being used for the whole industry. In addition, the Sri Lankan coconut sector is likely to be significantly adversely effected by climate change and there are a number of possible adaptation options being considered, but again there is no framework to undertake an economic assessment of these options. In this study we develop and test an equilibrium displacement model of the Sri Lankan coconut industry that will then be available to analyse the economic impact of different climate and policy scenarios and the distribution of these impacts among the various stakeholders in the industry.