9 transport improvement under panterritorial pricing and under optimal pricing shows that the gains are larger under panterritorial pricing than under optimal **pi.,'6** Nonetheless, the magnitude of these gains is small relative to the change in producers' surplus from a transport improvement under either pricing policy. For _ca=_ 1.33, the most extreme case in Table 3, the gain under panterritorial pricing is 1.039 times that under optimal pricing. These results carry over qualitatively to Table 4, although raising more revenue does accentuate materially the difference between the gains under the two pricing rules, as it did in the comparison between the two pricing rules at current levels of revenue (col. 1 versus col. 2 in Tables 3 and 4). For a=1.33, the gain from halving transport costs under panterritorial pricing is 1.108 times that under optimal pricing. In this hypothetical example, whether a change in pricing policy is adopted may well determine whether an infrastructural investment is justified.

24. These results on the greater benefits from investment in transport under panterritorial pricing reflect the fact that production is more dispersed than under optimal pricing, and illustrate the interdependence between decisions about transport investments and decisions about pricing reform. Of course, producers' surplus is still highest under optimal pricing for a given level of infrastructure; one would never want to adopt panterritorial pricing for the sole purpose of obtaining higher gains from transport investments. Rather, the interpretation is that a move to optimal pricing, if feasible, is an alternative way to realize some of the gains from a transport investment under panterritorial pricing, without the corresponding costs, and by so doing one may obviate the need for investment in transport.

25. Note finally, that while the discussion has been about a comparison between panterritorial pricing and optimal pricing, it can be extended easily to assess any other pricing schemes. For instance, an export tax (at rate _r)_ with private (full-cost) transportation would mean that ( 11) pi = _(l-,r)_ (p' -C') -a't,.

Such a scheme has superficial appeal because it may be thought to embody a user charge for transport, something !hat is desirable in many situations. As is clear from eqs. (9a) -(9d), however, such a schemrre is sub-optimal if the government is raising some revenue (R >0, X > 0 and _r_ < 1), which is O.he case for cotton in the Cote d'Ivoire. As noted, the reason is that charging the full cost of transport means that a tax at the port results in higher percentage taxation of the farmgate price as distance rises.

26. The consequences of adopting full-cost pricing of transportation are illustrated in cols. 3 and 6 of Table 3.7 In terms of producers' surplus, full-cost pricing of transport is better than panterritorial pricing, generally making up about sixty percent of the gap between optimal pricing and panterritorial pricing. The dispersion of **7nnl** orninc **nnti lncd c of mnvina frnm** panterritorial pricing to full-cost pricing is larger than the corresponding results of moving to optimal pricing. For instance, for the example given in Table 1, col. _5,_ the summary statistics

**6** That is, the difference in II between cols. I and 4 is larger than the difference in II between cols. 2 and _5._

7 The effect on the producer surplus associated with a given government revenue can be found by solving for the value of r that produces a revenue equal to R° from eqs. (1), (2) and (4) and then substituting the consequent set of p, into eqs. (3) and (5).