Policy-related Distortions toAgricultural IncentivesWhy do we care?How do we measure them?How do we use the measures?
Why do we care? Traditional static inefficiencies –‘’Harberger Triangles’’– Tend not to be very impressive Incentives fo...
Some research quantifies thesedynamic effects
One std. deviation in ag incentive distortion indexreduces overall growth rate by 0.6 percentage pts
How do we measuredistortions?A few examples
Large World Bankresearch project 2010Updating of the Krueger, Schiff,Valdes study in 1980sMany countries, developing andde...
Anderson also calculated manyindicators, but two main oneswere… Nominal rate of assistance NRA – how muchgovernment polic...
One finding – trend towardsneutrality, looking at NRAs …
Or RRAs
Like K-S-V study, positive support toimports, negative protection for exports,but both becoming more positive overtime
Evolution of RRAs by DevelopingRegionFrom LAC in the Global Agricultural Market: Harnessing Trade toFeed the World and Pro...
OECD standard indicators NAC Nominal Assistance Coefficient: ratio of farm receipts with and without support NPC Nominal...
Trends in supportOverall decline insupport, especiallybased on production
From Agricultural PublicExpenditure Review, NicaraguaPSE in Nicaragua is higher than OECDaverage
From Agricultural PublicExpenditure Review, NicaraguaSupport focused on a few commodities
From Agricultural PublicExpenditure Review, NicaraguaHigh Producer Support Creates Large Negative ConsumerSubsidy Estimate...
MAFAP: Monitoring African Foodand Agricultural Policies Joint project FAO, IFPRI, NEPAD, GATESFoundation, World Bank, USA...
Policy-related Distortions to Agricultural Incentives
Policy-related Distortions to Agricultural Incentives
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Policy-related Distortions to Agricultural Incentives

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Metrics for Agricultural Transformation: Update on Recent and Ongoing Developments
April 19, 2013
Washington, DC

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Policy-related Distortions to Agricultural Incentives

  1. 1. Policy-related Distortions toAgricultural IncentivesWhy do we care?How do we measure them?How do we use the measures?
  2. 2. Why do we care? Traditional static inefficiencies –‘’Harberger Triangles’’– Tend not to be very impressive Incentives for poor governance (corruption) Dynamic inefficiencies – poor investmentchoices– Public as well as private
  3. 3. Some research quantifies thesedynamic effects
  4. 4. One std. deviation in ag incentive distortion indexreduces overall growth rate by 0.6 percentage pts
  5. 5. How do we measuredistortions?A few examples
  6. 6. Large World Bankresearch project 2010Updating of the Krueger, Schiff,Valdes study in 1980sMany countries, developing anddevelopedCalculated many indicators of policy,including traditional trade indicators(NRP, ERP)Major findings of large net taxation ofagriculture in developing countries,mainly through indirect measures –exchange rate distortions andprotection of manufacturing
  7. 7. Anderson also calculated manyindicators, but two main oneswere… Nominal rate of assistance NRA – how muchgovernment policy caused the nominal returnsto agriculture to diverge from their levelswithout policy measures Relative rate of assistance – how muchgovernment policy caused the returns toagriculture to diverge from their levels withoutpolicy measures, relative to returns to non-agriculture
  8. 8. One finding – trend towardsneutrality, looking at NRAs …
  9. 9. Or RRAs
  10. 10. Like K-S-V study, positive support toimports, negative protection for exports,but both becoming more positive overtime
  11. 11. Evolution of RRAs by DevelopingRegionFrom LAC in the Global Agricultural Market: Harnessing Trade toFeed the World and Promote Rural Development-60-50-40-30-20-100101965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04LACAfricaAsia
  12. 12. OECD standard indicators NAC Nominal Assistance Coefficient: ratio of farm receipts with and without support NPC Nominal Protection Coefficient: the ratio of producer prices to world pricesmeasured at country’s border PSE Producer Support Estimate (%): The monetary value of policy transfers expressedas a percentage of gross farm receipts MPS Market Price Support: Part of PSE provided through measures that affect theprice received by farmers (trade measures, budget support linked to production) SCT Single Commodity Transfers: part of PSE attributable to support to identifiableindividual commodities CSE Consumer Support Estimate : Measures (trade and budget) that affectconsumer spending on ag products GSSE General Services Support Estimate: Public expenditures on services that benefitmany ag producers TSE Total Support Estimate: sum of PSE, budgetary transfers component of the CSEand the General Services Support Estimate. TSE enumerates support provided toproducers individually and collectively, as well as subsidies to consumers
  13. 13. Trends in supportOverall decline insupport, especiallybased on production
  14. 14. From Agricultural PublicExpenditure Review, NicaraguaPSE in Nicaragua is higher than OECDaverage
  15. 15. From Agricultural PublicExpenditure Review, NicaraguaSupport focused on a few commodities
  16. 16. From Agricultural PublicExpenditure Review, NicaraguaHigh Producer Support Creates Large Negative ConsumerSubsidy Estimate, Reducing Food Security of PoorConsumers
  17. 17. MAFAP: Monitoring African Foodand Agricultural Policies Joint project FAO, IFPRI, NEPAD, GATESFoundation, World Bank, USAID, websitehoused with FAO Using many of the policy indicatorsmentioned in this presentation Practical applications in country reports,policy briefs; database in 2013
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