The Impact of Dodd-Frank and the Huawei Shock on DRC Tin Exports

TL;DR

This study examines how the Dodd-Frank Act and the Huawei shock transformed DRC tin exports, revealing a shift to a captive market with demand elasticity dropping to zero and structural rigidity persisting despite deregulation.

Contribution

It provides the first empirical analysis of the DRC tin market's response to regulatory and external shocks, highlighting the formation of a captive market and the role of external demand surges.

Findings

Demand elasticity dropped to zero after Dodd-Frank regulation.

Market became a captive market driven by certification, not price.

External demand surge in 2019 broke structural rigidity.

Abstract

This paper investigates the structural transformation of the Democratic Republic of the Congo (DRC) tin market induced by the U.S. Dodd-Frank Act. Focusing on the breakdown of the pricing mechanism, we estimate the price elasticity of export demand from 2010 to October 2022 using a structural identification strategy that overcomes the lack of reliable unit value data. Our analysis reveals that the regulation effectively destroyed the price mechanism, with demand elasticity dropping to zero. This indicates the formation of a ``captive market'' driven by certification requirements rather than price competitiveness. Also, we find strong hysteresis; deregulation alone failed to restore market flexibility. The structural rigidity was finally broken not by policy suspension, but by the 2019 ``Huawei shock,'' an external demand surge that forced supply chain diversification.