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Appendix I. Description of Sources and Transformation
I am grateful to Sharmini Coorey for very helpful discussions and suggestions and providing some of the data. I would also like to thank Paul Heytens and Markus Haacker for useful comments. The usual disclaimer applies.
The collapse of the commercial farming system also resulted in increased reliance on government-supplied inputs (seeds, fertilizers), which have often been delayed (see Ivaschenko (2005)).
Such a formulation—where the supply of official exports is a function of both the real parallel and real official exchange rates—would be consistent with a model where the variable cost of supplying (or distributing to) the official and parallel markets differ (for a given good), but the same fixed factor is used in production. The (variable) costs of distribution can be measured by domestic prices (see Coorey (1990), p. 178).
Given the times series component of the data, dynamic heterogeneous cointegrated panel data models—which allow for heterogeneity in parameters and dynamics across exports to the different countries—were also estimated. The variables were found weakly integrated of order 1 and formed a cointegrating vector.
Lower ratings are given to countries where racial and nationality tensions are high because opposing groups are intolerant and unwilling to compromise. Higher ratings are given to countries where tensions are minimal, even though such differences may still exist.