Is A Target Price Responsible for Rice Oversupply?

This study attempts to answer a couple of questions to which little consensus has been reached: First, is the Rice Variable Direct Payment Scheme really coupled, and if so, to what extent? Second, could redesigning, among other components of the Scheme, target price mitigate the coupling effects believed to exacerbate the recent oversupply of rice? Based on the ex-post evaluation method using a dynamic partial equilibrium model, some key findings and suggestions are made as follows: 1) the Scheme is coupled albeit the effect is considerably negligible; 2) nevertheless, changing such factors as target price is expected to reduce ending stocks, which require burdensome budgets, and rice farm income, which requires employing other policy instruments, including the policy mix, in line with the change of the Scheme; 3) before discussing target prices for the coming five years, careful attention should be paid to anticipated and unintended effects. Out of these findings, this study is expected to be informative and helpful for policy makers.