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General equilibrium measures of agricultural policy bias in fifteen developing countries

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  • Jensen, Henning Tarp
  • Robinson, Sherman
  • Tarp, Finn

Abstract

In this paper, we present a comparative analysis of the extent to which indirect taxes, tariffs, and exchange rates affected relative price incentives for agricultural production in a representative sample of 15 developing countries in the 1990s. Empirical studies from the 1980s, using partial equilibrium methodologies, supported the view that policies in many developing countries imparted a major incentive bias against agriculture. Eliminating this bias was one of the goals of policy reform strategies, including structural adjustment programs, supported by the World Bank and others; and many countries undertook such reforms in the 1990s. In our sample, general equilibrium analysis indicates that, in the 1990s, the economywide system of indirect taxes, including tariffs and export taxes, significantly discriminated against agriculture in only one country, was largely neutral in five, provided a moderate subsidy to agriculture in four, and strongly favored agriculture in five. Earlier work assumed that overvaluation of the exchange rate would hurt agriculture, which was assumed to be largely tradable. In a general equilibrium setting, changes in the exchange rate can as demonstrated in this paper lead to anything between strongly increasing and decreasing relative agriculture/non-agriculture incentives, depending on relative trade shares. We conclude that, whatever incentive bias there was in the 1980s, it has mostly disappeared by the 1990s. We also find that it is difficult to generalize-country specific circumstances greatly affect the relative impact of trade policies on agriculture and the rural economy. Authors' Abstract.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series TMD discussion papers with number 105.

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Date of creation: 2002
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Handle: RePEc:fpr:tmddps:105

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References

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  1. Bautista, Romeo M, et al, 2001. "Policy Bias and Agriculture: Partial and General Equilibrium Measures," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 5(1), pages 89-104, February.
  2. Lofgren, Hans & El-Said, Moataz, 2001. "Food subsidies in Egypt: reform options, distribution and welfare," Food Policy, Elsevier, Elsevier, vol. 26(1), pages 65-83, February.
  3. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers, International Food Policy Research Institute (IFPRI) 75, International Food Policy Research Institute (IFPRI).
  4. Jensen, Henning Tarp & Robinson, Sherman & Tarp, Finn, 2002. "General equilibrium measures of agricultural policy bias in fifteen developing countries," TMD discussion papers, International Food Policy Research Institute (IFPRI) 105, International Food Policy Research Institute (IFPRI).
  5. de Melo, Jaime & Robinson, Sherman, 1981. "Trade Policy and Resource Allocation in the Presence of Product Differentiation," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 169-77, May.
  6. Arndt, Channing & Jensen, Henning Tarp & Tarp, Finn, 2000. "Structural Characteristics of the Economy of Mozambique: A SAM-Based Analysis," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 4(3), pages 292-306, October.
  7. Robinson, Sherman & El-Said, Moataz & San, Nu Nu, 1998. "Rice policy, trade, and exchange rate changes in Indonesia: A general equilibrium analysis," Journal of Asian Economics, Elsevier, Elsevier, vol. 9(3), pages 393-423.
  8. Guanghua Wan & Amelia U. Santos-Paulino, 2008. "Introduction," The World Economy, Wiley Blackwell, vol. 31(10), pages 1273-1276, October.
  9. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, World Bank Group, vol. 2(3), pages 255-71, September.
  10. Ahmed, Akhter U. & Gutner, Tamar & Lofgren, Hans & Bouis, Howarth E., 2001. "The Egyptian food subsidy system: structure, performance, and options for reform," Research reports, International Food Policy Research Institute (IFPRI) 119, International Food Policy Research Institute (IFPRI).
  11. Harris, Rebecca Lee, 2001. "A computable general equilibrium analysis of Mexico's agricultural policy reforms," TMD discussion papers, International Food Policy Research Institute (IFPRI) 65, International Food Policy Research Institute (IFPRI).
  12. Henning Tarp Jensen & Finn Tarp, 2002. "CGE Modelling and Trade Policy: Reassessing The Agricultural Bias," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 53(2), pages 383-405.
  13. Amelia Santos-Paulino & A.P. Thirlwall, 2004. "Trade Liberalisation And Economic Performance In Developing Countries - Introduction," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(493), pages F1-F3, 02.
  14. Devarajan, Shantayanan & Sussangkarn, Chalongphob, 1992. "Effective Rates of Protection When Domestic and Foreign Goods Are Imperfect Substitutes: The Case of Thailand," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 701-11, November.
  15. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2002. "Developing Countries and the Gains from Regionalism: Links between Trade and Farm Policy Reforms in Mexico," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(3), pages 736-748.
  16. C. Arndt & H. T. Jensen & S. Robinson & F. Tarp, 2000. "Marketing Margins and Agricultural Technology in Mozambique," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(1), pages 121-137.
  17. Tarp, Finn & Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Heltberg, Rasmus, 2002. "Facing the development challenge in Mozambique: an economywide perspective," Research reports, International Food Policy Research Institute (IFPRI) 126, International Food Policy Research Institute (IFPRI).
  18. Kherallah, Mylene & Lofgren, Hans & Gruhn, Peter & Reeder, Meyra M., 2000. "Wheat policy reform in Egypt: adjustment of local markets and options for future reforms," Research reports, International Food Policy Research Institute (IFPRI) 115, International Food Policy Research Institute (IFPRI).
  19. Majumdar, Sumon & Mani, Anandi & Mukand, Sharun W., 2004. "Politics, information and the urban bias," Journal of Development Economics, Elsevier, Elsevier, vol. 75(1), pages 137-165, October.
  20. Cattaneo, Andrea & Ojeda, Raul A. Hinojosa- & Robinson, Sherman, 1999. "Costa Rica trade liberalization, fiscal imbalances, and macroeconomic policy: a computable general equilibrium model," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 10(1), pages 39-67.
  21. Löfgren, Hans & Robinson, Sherman & Thurlow, James, 2002. "Macro and micro effects of recent and potential shocks to copper mining in Zambia," TMD discussion papers, International Food Policy Research Institute (IFPRI) 99, International Food Policy Research Institute (IFPRI).
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Citations

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Cited by:
  1. Henning Tarp Jensen & Sherman Robinson & Finn Tarp, 2004. "General Equilibrium Measures of Agricultural Policy Bias in Fifteen Developing Countries," Discussion Papers 04-25, University of Copenhagen. Department of Economics.
  2. Baffes, John & De Gorter, Harry, 2005. "Disciplining agricultural support through decoupling," Policy Research Working Paper Series 3533, The World Bank.
  3. Fan, Shenggen & Chan-Kang, Connie & Mukherjee, Anit, 2005. "Rural and urban dynamics and poverty: Evidence from China and India," FCND discussion papers, International Food Policy Research Institute (IFPRI) 196, International Food Policy Research Institute (IFPRI).
  4. Kym Anderson, 2006. "Reducing Distortions to Agricultural Incentives: Progress, Pitfalls, and Prospects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 88(5), pages 1135-1146.
  5. Anderson, Kym & Kurzweil, Marianne & Martin, William J. & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Methodology for Measuring Distortions to Agricultural Incentives," Agricultural Distortions Working Paper, World Bank 48326, World Bank.
  6. Fofana, Ismaël & Corong, Erwin & Chatti, Rim & Bouazouni, Omar, 2012. "Taxation policy and gender employment in the Middle East and North Africa Region: A comparative analysis of Algeria, Egypt, Morocco, and Tunisia," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1227, International Food Policy Research Institute (IFPRI).
  7. Anderson, Kym, 2003. "Impact assessment of IFPRI's research and related activities based on economywide modeling," Impact assessments, International Food Policy Research Institute (IFPRI) 21, International Food Policy Research Institute (IFPRI).
  8. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2005. "Distortions to world trade: impacts on agricultural markets and farm incomes," Policy Research Working Paper Series 3736, The World Bank.
  9. Anderson, Kym & Valenzuela, Ernesto & van der Mensbrugghe, Dominique, 2009. "Welfare and Poverty Effects of Global Agricultural and Trade Policies Using the Linkage Model," Agricultural Distortions Working Paper, World Bank 52785, World Bank.
  10. Kym Anderson & Ernesto Valenzuela, 2007. "Do Global Trade Distortions Still Harm Developing Country Farmers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 143(1), pages 108-139, April.

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