Optimal export tax rates of cocoa beans: A vector error correction model approach

Aiming to support downstream cocoa processing industries, the Indonesian Government announced an export tax on cocoa beans in 2010. This paper investigates whether the Indonesian Government has imposed an optimal tax rate and examines the determinants of cocoa bean export growth using data from Ivory Coast, Ghana and Indonesia for 1970-2011 and applying a vector error correction model. This study highlights the interdependence of major cocoa exporting countries' policy and reveals that Indonesia currently imposes a tax rate that is above its optimal rate.