US$1,328.3 million for the initial baseline. A major reason for this is that price is 18.8 percent lower. However, overall consumption falls by 3 percent. This is driven by the lower consumption from rice producing households, which suffer a loss in income as a result of the lower price for rice. The simulation also suggests that given the current technical and economic parameters, in order to maximize consumer/producer surplus, the total domestic production of rice (524,520 Mt) should only be produced in the Mangrove (351,600 Mt) and Riverain (172,920 Mt) ecologies and no rice should be produced in the Upland, IVS and Boli ecologies. This reflects a dramatic shift for the current spatial distribution of the crop. Furthermore, the marginal value (shadow price) of the upland land acreage in the model results is US$ - 166.28, suggesting that if an additional hectare of upland rice was included, the overall consumer/producer surplus would fall by US$166.28. In contrast, the marginal value of Mangrove land is US$ 191.70, suggesting that if one more hectare of Mangrove land could be added beyond the current bound the total consumer/producer surplus would be increased by US$191.70.

**Table 11: Results of the model with Acreage Upper bounds compared with survey data**

|Scenario|Consumer<br>&<br>Producer<br>Surplus<br>(US$Mn)|Domestic<br>Consumption<br>(Mt)|Domestic<br>Production<br>(Mt)|Imports<br>(Mt)|Exports<br>(Mt)|Price<br>(US$/Mt)|Trade<br>Balance<br>(US$ Mn)|Employment<br>(Numbers)|
|---|---|---|---|---|---|---|---|---|
|**Survey**<br>**data(2016)**||**1,029,709.0**|**695,255.0**|**334,454.0**||**770.0**||**732,461.0***|
|Normative<br>Baseline|1,401.6|1,002,010.2|524,520|861,521.5|384,030|624.11|(413.5)|142,280|

Source: Survey data and Model output Interestingly, because of the low import price (in part due to the duty waiver) the simulation also suggested that to maximize consumer/producer surplus, Sierra Leone should import 861,521.5 Mt of rice and export 384,030Mt of rice. However, this would leave the country with a substantial rice trade balance deficit of US$413.5 million. Under the current technical and policy environment for the rice sector in Sierra Leone, maximizing consumer and producer surplus would also lead to a sharp reduction in employment in the rice sector. The results of the simulation show employment falling to 142,280, from 669,340 in the initial baseline—a substantial reduction of nearly 79 percent. Most of this reduction in labor would come from the ecologies where no rice would be produced. While this outcome may be optimal in terms of the maximization of consumer and producer surplus, it does not appear to be feasible in terms of employment and the balance of payments. The next section of the paper discusses the policy experiments, which considers the impact of removing the tariff waiver and increasing the tariff as well as the impact of increasing the minimum wage.

# **Policy Experiments**

# _Tariff simulations_

The normative model is used to simulate the impact of tariff increases on several policy parameters of interest including prices (which are endogenous), consumer and producer surplus, domestic consumption, domestic production, imports, exports, the rice trade balance and employment. The results of the simulation, assuming four different levels of tariffs on rice imports are shown in Table 12 below.

A 1 percent tariff on rice imports, would, other things equal, results in an increase in domestic price to US$856.69 per ton, or approximately an 11 percent increase above the price at the time of the latest 21