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Global Distortions to Agricultural Markets: New Indicators of Trade and Welfare Impacts, 1955 to 2007

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  • Lloyd, Peter J.
  • Croser, Johanna L.
  • Anderson, Kym

Abstract

Despite reforms over the past quarter-century, world agricultural markets remain highly distorted by government policies. Traditional indicators of those price distortions such as the nominal rate of assistance and consumer tax equivalent provide measures of the degree of intervention, but they can be misleading as indicators of the true effects of those policies. By drawing on recent theoretical literature that provides indicators of the trade- and welfare-reducing effects of price and trade policies, this paper develops more-satisfactory indexes for capturing distortions to agricultural incentives. It then exploits the Agricultural Distortion database recently compiled by the World Bank to generate estimates of them for both developing and high-income countries over the past half century, based on a sample of 75 countries that together account for all but one-tenth of the world’s population, GDP and agricultural production. While they are still only partial equilibrium measures, they provide a much better approximation of the true trade and welfare effects of sectoral policies without needing a formal model of global markets or even price elasticity estimates.

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Bibliographic Info

Paper provided by Australian Agricultural and Resource Economics Society in its series 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia with number 48049.

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Date of creation: 2009
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Handle: RePEc:ags:aare09:48049

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Keywords: Distorted incentives; agricultural and trade policies; trade restrictiveness index;

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References

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  1. Johanna L. Croser & Peter J. Lloyd & Kym Anderson, 2010. "How Do Agricultural Policy Restrictions on Global Trade and Welfare Differ Across Commodities?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 698-712.
  2. Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Department of Economics 95-10, California Davis - Department of Economics.
  3. Anderson, Kym & Kurzweil, Marianne & Martin, Will & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Measuring Distortions to Agricultural Incentives, Revisited," CEPR Discussion Papers 6924, C.E.P.R. Discussion Papers.
  4. Anderson, Kym & Martin, William J., 2007. "Distortions to Agricultural Incentives in Asia," Agricultural Distortions Working Paper 48557, World Bank.
  5. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating Trade Restrictiveness Indices," CEPR Discussion Papers 5576, C.E.P.R. Discussion Papers.
  6. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
  7. MacLaren, Donald & Lloyd, Peter J., 2008. "Measuring assistance to the agricultural industry in Australia using a Production Assistance Index," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6033, Australian Agricultural and Resource Economics Society.
  8. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
  9. James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200.
  10. Anderson, James E. & Bannister, Geoffrey, 1992. "The trade restrictiveness index : an application to Mexican agriculture," Policy Research Working Paper Series 874, The World Bank.
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Cited by:
  1. Johanna L. Croser & Peter J. Lloyd & Kym Anderson, 2009. "How Do Agricultural Policy Restrictions to Global Trade and Welfare Differ Across Commodities?," School of Economics Working Papers 2009-12, University of Adelaide, School of Economics.
  2. Kym Anderson & Johanna Croser, 2011. "Novel indicators of the trade and welfare effects of agricultural distortions in OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 269-302, June.
  3. Anderson, Kym & Croser, Johanna L. & Sandri, Damiano & Valenzuela, Ernesto, 2009. "Agricultural Distortion Patterns Since the 1950s: What Needs Explaining?," Agricultural Distortions Working Paper 50305, World Bank.
  4. Cletus C. Coughlin, 2010. "Measuring international trade policy: a primer on trade restrictiveness indices," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 381-394.
  5. Croser, Johanna & Anderson, Kym, 2011. "Changing contributions of different agricultural policy instruments to global reductions in trade and welfare," World Trade Review, Cambridge University Press, vol. 10(03), pages 297-323, July.
  6. Anderson, Kym, 2009. "Krueger/Schiff/Valdés Revisited: Agricultural Price and Trade Policy Reform in Developing Countries since 1960," CEPR Discussion Papers 7601, C.E.P.R. Discussion Papers.
  7. Anderson, Kym, 2009. "Political Economy of Distortions to Agricultural Incentives: Introduction and Summary," Agricultural Distortions Working Paper 50306, World Bank.

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