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

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.

KEYWORDS:

• Coffee price
• shock
• school dropout
• financial crisis

JEL CLASSIFICATION:

• F16
• I21
• I31

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.

³ Details on the ERHS data can be obtained from https://www.ifpri.org/publication/ethiopian-rural-household-surveys-erhs-1989-2009.

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 Table 2 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.