Policy-related Distortions to Agricultural Incentives
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Transcript of Policy-related Distortions to Agricultural Incentives
Policy-related Distortions to Agricultural Incentives
Why 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 investment
choices – Public as well as private
Some research quantifies these dynamic effects
One std. deviation in ag incentive distortion index reduces overall growth rate by 0.6 percentage pts
How do we measure distortions?
A few examples
Large World Bank research project 2010 Updating of the Krueger, Schiff, Valdes study in 1980s Many countries, developing and developed Calculated many indicators of policy, including traditional trade indicators (NRP, ERP) Major findings of large net taxation of agriculture in developing countries, mainly through indirect measures – exchange rate distortions and protection of manufacturing
Anderson also calculated many indicators, but two main ones
were… Nominal rate of assistance NRA – how much
government policy caused the nominal returns to agriculture to diverge from their levels without policy measures
Relative rate of assistance – how much government policy caused the returns to agriculture to diverge from their levels without policy measures, relative to returns to non-agriculture
One finding – trend towards neutrality, looking at NRAs …
Or RRAs
Like K-S-V study, positive support to imports, negative protection for exports, but both becoming more positive over
time
Evolution of RRAs by Developing Region
From LAC in the Global Agricultural Market: Harnessing Trade to Feed the World and Promote Rural Development
-60
-50
-40
-30
-20
-10
0
10
1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
LAC
Africa
Asia
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 prices
measured at country’s border PSE Producer Support Estimate (%): The monetary value of policy transfers expressed
as a percentage of gross farm receipts MPS Market Price Support: Part of PSE provided through measures that affect the
price received by farmers (trade measures, budget support linked to production) SCT Single Commodity Transfers: part of PSE attributable to support to identifiable
individual commodities CSE Consumer Support Estimate : Measures (trade and budget) that affect
consumer spending on ag products GSSE General Services Support Estimate: Public expenditures on services that benefit
many ag producers TSE Total Support Estimate: sum of PSE, budgetary transfers component of the CSE
and the General Services Support Estimate. TSE enumerates support provided to producers individually and collectively, as well as subsidies to consumers
Trends in support
Overall decline in support, especially based on production
From Agricultural Public Expenditure Review, Nicaragua
PSE in Nicaragua is higher than OECD average
From Agricultural Public Expenditure Review, Nicaragua
Support focused on a few commodities
From Agricultural Public Expenditure Review, Nicaragua
High Producer Support Creates Large Negative Consumer Subsidy Estimate, Reducing Food Security of Poor
Consumers
MAFAP: Monitoring African Food and Agricultural Policies
Joint project FAO, IFPRI, NEPAD, GATES Foundation, World Bank, USAID, website housed with FAO
Using many of the policy indicators mentioned in this presentation
Practical applications in country reports, policy briefs; database in 2013