7) PSANTOS4 = β0 + β1Alpha + β2Alpha*D1965-71 + β3Alpha*D1972-79 + β4PCOMPETITOR + β5RS
+ D1977 + D1979 + ε.
8) PCOMPETITOR = γ0 + γ1Alpha + γ2Alpha*D1965-71 + γ3Alpha*D1972-79 + γ4PCOMPETITOR + γ5RS
+ D1977 + D1979 + ε.
9) Alpha = φo + ΦiPsantos4 + φ2Pcompetitor + φ3RS + D1965-71 + D1972-79 + Davisos + AR(1) + μ
10) RS = λ0 + λ1PSANTOS4 + λ2PCOMPETITOR + ν
Equation 7) is identical to equation 6). The specification of the other equations is
explained when the results are discussed. The system was again estimated once using MAMS
and once using Other Milds as the competitor coffee. The results are shown as Equations 7.1 and
7.2 to 10.1 and 10.2 in Table 3. Each of the estimated equations performs well. Nearly all of the
estimated coefficients have the expected sign, where a sign is indicated, and most coefficients are
statistically significant. The Durbin Watson coefficients showed no sign of serial correlation
after an autoregressive transformation was used in the equation explaining the level of the unit
export tax rebate, Alpha.
In each of the two equations estimating the price of Brazilian coffee, PSANTOS4, the
coefficient on Alpha is again highly significant and less than 1. Using a Wald Test, the null
hypotheses that the coefficient on Alpha is either zero or 1 are both rejected at the 1% level.
Thus, the results again suggest that Brazil’s use of export tax rebates increased the export price
of Brazilian coffee, but only by about half the amount of the unit tax rebate. Equally important,
the coefficients on the interactive dummy for Alpha in the period 1972-79 are negative, as
expected, and also highly significant when MAMS is used as the competitor coffee. Using the
latter equation, a Wald Test indicates that the hypothesis that the export tax rebates had no effect
on Brazil’s export price during 1972-79 cannot be rejected at the 1% level, again as
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