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Original Articles

The effect of coffee price shock on school dropout: new evidence from the 2008 global financial crisis

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ABSTRACT

This article examines the effect of coffee price shock on the school dropout status of children in rural Ethiopia. To identify the effect, I exploit the exogenous coffee price shock caused by the 2008 global financial crisis. Using a unique rural data set collected before and shortly after the crisis, I compare the school dropout status of children in coffee-producing and non–coffee-producing villages. The difference-in-difference estimate suggests that the decline in the global price of coffee during the financial crisis increased school dropout rates among children aged 15–18 in coffee-producing villages. The effect is more pronounced among female children in this age group.

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Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Because coffee is not a necessity for households in developing countries, the fall in coffee prices is not expected to directly affect the welfare, and hence, the school dropout status of children of net coffee-buyer households.

2 The ERHS was not collected for the period 2005–2008 and thus for the pre-financial crisis period I resort to the outcomes observed in 2004.

4 The rate of change in the poverty rate in non–coffee-producing villages is higher than in coffee-producing villages and to the extent that this increases school dropout in non–coffee-producing villages, my estimates in represent the lower bound of the true school dropout effect of coffee price shocks.

5 The marginal effect from the probit regression, which is included in the supporting document, also shows the same result.

6 This is the high school entry age, if the student progresses without repeating a class.

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