Policy-related Distortions to Agricultural Incentives
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 for poor governance (corruption) Dynamic inefficiencies – poor investmentchoices– Public as well as private
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
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
One finding – trend towardsneutrality, looking at NRAs …
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 Promote Rural Development-60-50-40-30-20-100101965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04LACAfricaAsia
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
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, Reducing Food Security of PoorConsumers
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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