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household connection, public standpipe, and protected well or spring). Rather, irrigation facility development may be a better proxy for agricultural water infrastructure in this case. In fact, when the ratio of irrigated land to total cropland is adopted, it has been found that irrigation could reduce the coffee production prices (Table 7). Although the water access coefficients are still significant, the coefficient of irrigation penetration rate is significant and negative.

<u>Table 7. Coffee, cocoa and chocolate: three stage least squares estimates with irrigation</u>

||With lagged|infrastructu|re variable|With curren<br>i|t infrastructu<br>nstrumented|re variable<br>|
|---|---|---|---|---|---|---|
|Market share equation 1/ 2/<br>|||||||
|3/<br>*<br>ln<br>_jk_<br>_p_|-2.418 <sup>***</sup>|-5.480 <sup>***</sup>|-5.480 <sup>***</sup>|-2.418 <sup>***</sup>|-5.480 <sup>***</sup>|-5.480 <sup>***</sup>|
||(0.769)<br>|(0.808)|(0.808)|(0.769)<br>|(0.790)|(0.797)|
|Constant|-8.293<br>***|...|...|-8.293 <sup>***</sup>|...|...|
||(1.094)|...|...|(1.095)|...|...|
|Price equation 4/|||||||
|Irrigation|-0.0127|-0.579 <sup>*</sup>|-0.596 <sup>*</sup>|-0.012|-1.405 <sup>***</sup>|-0.207|
||(0.575)|(0.352)|(0.352)|(0.521)|(0.497)|(0.468)|
|Water access||0.018 <sup>***</sup>|||0.008 <sup>**</sup>||
|||(0.006)|||(0.003)||
|Rural water access|||0.017 <sup>***</sup>|||0.018 <sup>***</sup>|
||||(0.005)|||(0.005)|
|_ΔER_|-0.010|0.007|-0.001|-0.010|0.021 <sup>**</sup>|0.006|
||(0.012)|(0.010)|(0.011)|(0.012)|(0.011)|(0.011)|
|ln_s jk_|-0.257 <sup>***</sup>|-0.131 <sup>***</sup>|-0.122 <sup>***</sup>|-0.257 <sup>***</sup>|-0.140 <sup>***</sup>|-0.132 <sup>***</sup>|
||(0.059)|(0.044)|(0.043)|(0.058)|(0.044)|(0.043)|
|Constant|-1.463 <sup>**</sup>|-1.555 <sup>**</sup>|-1.380 <sup>**</sup>|-1.463 <sup>**</sup>|-0.442|-1.587 <sup>**</sup>|
||(0.637)|(0.750)|(0.705)|(0.636)|(0.589)|(0.726)|
|Obs.|175|155|155|172|149|146|
|Weather variables|Yes|Yes|Yes|Yes|Yes|No|
|Number of country dummies|62|55|55|61|53|52|
|Chi-square statistics|||||||
|Market share equation|219.9 <sup>***</sup>|1498.6 <sup>***</sup>|1498.6 <sup>***</sup>|217.4 <sup>***</sup>|1476.3 <sup>***</sup>|1403.4 <sup>***</sup>|
|Price equation|127.6 <sup>***</sup>|180.6 <sup>***</sup>|182.0 <sup>***</sup>|127.9 <sup>***</sup>|185.4 <sup>***</sup>|184.5 <sup>***</sup>|

Source: Author's calculations.

1/ The dependent variable is ln _s jt_ .

- 2/ The constant term in the market share equation is dropped due to multicollinearity with country-specific dummy variables.

3/ The estimated price coefficient only marginally varies among models, because instrumental variables adopted 4/ The dependent variable is .are almost identical. ln _p_ * _jk_ Third, economies of scale have a large role to play in coffee and cocoa production and exports. The quantity coefficient in the market share equation is significantly negative for all the models. As shown in Figure 11, the majority of coffee and cocoa producers in Africa still remain relatively small. It will be a challenge, but also an opportunity, to improve their competitiveness by increasing their bargaining power through collective action, for example marketing cooperatives.