Bolivian coca: A perennial leaf crop subject to supply reduction policies

Coca, a perennial leaf crop, is among Bolivia's principal agricultural commodities. Harvests in the Cochabamba Subtropics (primarily in the Chapare Region) represent 25% to 30% of total Andean production and 85% of total Bolivian output. The Bolivian harvest fuels a domestic coca-cocaine processing sector. The illicit processing sector serves an international export industry. Final consumers in the United States (cocaine addicts and "casual users") represent a significant export market. The Government of the United States advocates a production-based policy response to the illicit commercial relationship. Supply reduction policies seek to limit the relative profitability of leaf cultivation in the Bolivian market, and ultimately, to eliminate coca derivative exports. Policy initiatives include acreage eradication programs, crop substitution schemes, rural development projects, and interdiction-induced market disruptions. Policy instruments include output prices, regional wages, and voluntary eradication payments.;This research comprises three essays. The first essay describes the evolution of the Bolivian coca sector, contemporary cultivation issues, and current supply reduction initiatives. The second essay describes a theoretical supply and investment model. The model characterizes intertemporal farm-level management decisions (production, acreage investment, and acreage removal decisions). The model specifies a finite-horizon dynamic optimization process with intertemporal policy effects: exogenous supply reduction policies elicit endogenous farm-level management responses. The theoretical model supports a quantitative analytical framework (an empirically-based policy simulation model). The quantitative model forms the core of the third essay. The final essay describes and implements a series of quantitative farm-level policy experiments. Specific to market conditions in the Chapare Region, the experimental simulation process identifies "effective" price-based, wage-based, and payment-based supply reduction policies (policies which eliminate production and investment activities).;Theoretical and empirical results suggest the inadequacy of current supply reduction policies. Both models (theoretical and quantitative) demonstrate differences between short- and long-run supply elasticities. A policy may dampen current-period output but have no effect on long-run production decisions (e.g. an unsustained interdiction policy which induces short-term price shocks). Voluntary eradication programs may subsidize "unnecessary" acreage removals (acreage removals which have little or no impact on aggregate supply).