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Optimal Food Price Stabilization in a Small Open Developing Country

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  • Christophe Gouel
  • Sébastien Jean

Abstract

This paper analyzes food price stabilization policies in a small, open, developing country. Without public intervention, price dynamics are driven by domestic productive shocks and international prices. Trade and/or storage policies are optimally designed to increase welfare, in a context where consumers are risk-averse and markets are incomplete. An optimal storage policy on its own is detrimental to consumers, since its stabilizing benefits leak into the world market. In contrast, optimal combination of storage and trade policies results in a powerful stabilization of domestic food prices. Such a policy mix includes export restrictions, which are harmful to export partners, but to refrain from using them is costly and entails substantial transfers from consumers to producers.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2012-01.

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Date of creation: Jan 2012
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Handle: RePEc:cii:cepidt:2012-01

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Keywords: Food security; incomplete markets; storage; trade policy; export restrictions;

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Citations

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Cited by:
  1. Martin, William J., 2012. "Managing High and Volatile Food Prices," Trade Policy Issues Papers 142732, International Agricultural Trade Research Consortium.
  2. Kym Anderson & Maros Ivanic & Will Martin, 2013. "Food Price Spikes, Price Insulation, and Poverty," Departmental Working Papers 2013-11, The Australian National University, Arndt-Corden Department of Economics.
  3. Daiju Narita & Martin F. Quaas, 2012. "Adaptation to Climate Change and Climate Variability: Do It Now or Wait and See?," Kiel Working Papers 1809, Kiel Institute for the World Economy.
  4. Christophe Gouel, 2013. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Working Papers 18934, National Bureau of Economic Research, Inc.
  5. Jean-Christophe Bureau & Sébastien Jean, 2013. "Trade Liberalization in the Bio-Economy: Coping with a New Landscape," Working Papers 2013-15, CEPII research center.
  6. Ivanic, Maros & Martin, Will & Zaman, Hassan, 2011. "Estimating the short-run poverty impacts of the 2010-11 surge in food prices," Policy Research Working Paper Series 5633, The World Bank.
  7. Larson, Donald F. & Lampietti, Julian & Gouel, Christophe & Cafiero, Carlo & Roberts, John, 2012. "Food security and storage in the Middle East and North Africa," Policy Research Working Paper Series 6031, The World Bank.
  8. Paolo E. Giordani & Nadia Rocha & Michele Ruta, 2012. "Food Prices and the Multiplier Effect of Export Policy," Working Papers LuissLab 1297, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  9. Quy-Toan Do & Andrei A. Levchenko & Martin Ravallion, 2013. "Trade Insulation as Social Protection," NBER Chapters, in: The Economics of Food Price Volatility National Bureau of Economic Research, Inc.
  10. Hoekman, Bernard & Martin, Will, 2012. "Reducing distortions in international commodity markets : an agenda for multilateral cooperation," Policy Research Working Paper Series 5928, The World Bank.
  11. Laborde, David & Martin, Will, 2012. "Agricultural trade : what matters in the Doha round ?," Policy Research Working Paper Series 6261, The World Bank.
  12. Kornher, Lukas & Kalkuhl, Matthias, 2013. "Food price volatility in developing countries and its determinants," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156132, German Association of Agricultural Economists (GEWISOLA).
  13. Miranda, Mario J. & Farrin, Kathleen M. & Larson, Donald F. & Chen, Shu-Ling, 2013. "Differential Effects of Food Security Policies on Subsistence Farmers and the Urban Poor," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149736, Agricultural and Applied Economics Association.

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