Can Price Incentive to Smuggle Explain the Contraction of the Cocoa Supply in Ghana?

From the early 1960s to the early 1980s, the officially recorded output of cocoa in Ghana declined by 60%. During the 1983-95 Economic Recovery Programme, however, the official output of cocoa doubled. Although these developments have inspired much empirical research, most of the studies have been unable to explain the medium?term persistence of cocoa output in remaining below its estimated capacity level. The paper argues that the price incentive to smuggle can explain as much as one?half of the observed decline in official output from its trend and the subsequent recovery. A co?integration analysis and a dynamic error?correction model of cocoa supply support the analysis.