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General equilibrium measures of agricultural policy bias in fifteen developing countries

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Author Info
Jensen, Henning Tarp
Robinson, Sherman
Tarp, Finn

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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 listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Majumdar, Sumon & Mani, Anandi & Mukand, Sharun W., 2004. "Politics, information and the urban bias," Journal of Development Economics, Elsevier, vol. 75(1), pages 137-165, October. [Downloadable!] (restricted)
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  2. 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, vol. 9(3), pages 393-423. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Henning Tarp Jensen & Finn Tarp, 2002. "CGE Modelling and Trade Policy: Reassessing The Agricultural Bias," Journal of Agricultural Economics, Blackwell Publishing, vol. 53(2), pages 383-405. [Downloadable!] (restricted)
  5. Harris, Rebecca Lee, 2001. "A computable general equilibrium analysis of Mexico's agricultural policy reforms," TMD discussion papers 65, International Food Policy Research Institute (IFPRI). [Downloadable!]
  6. Arndt, Channing & Jensen, Henning Tarp & Tarp, Finn, 2000. "Structural Characteristics of the Economy of Mozambique: A SAM-Based Analysis," Review of Development Economics, Blackwell Publishing, vol. 4(3), pages 292-306, October. [Downloadable!] (restricted)
  7. Ahmed, Akhter U. & Gutner, Tamar & Lofgren, Hans & Bouis, Howarth E., 2001. "The Egyptian food subsidy system: structure, performance, and options for reform," Research reports 119, International Food Policy Research Institute (IFPRI). [Downloadable!]
  8. Amelia Santos-Paulino & A.P. Thirlwall, 2004. "Trade Liberalisation And Economic Performance In Developing Countries - Introduction," Economic Journal, Royal Economic Society, vol. 114(493), pages F1-F3, 02. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. Burfischer, Mary E & Robinson, Sherman & Thierfelder, Karen, 2002. " Developing Countries and the Gains from Regionalism: Links between Trade and Farm Policy Reforms in Mexico," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 84(3), pages 736-48, August. [Downloadable!] (restricted)
  11. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI). [Downloadable!]
  12. Jensen, Henning Tarp & Robinson, Sherman & Tarp, Finn, 2002. "General equilibrium measures of agricultural policy bias in fifteen developing countries," TMD discussion papers 105, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  13. Tarp, Finn & Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Heltberg, Rasmus, 2002. "Facing the development challenge in Mozambique: an economywide perspective," Research reports 126, International Food Policy Research Institute (IFPRI). [Downloadable!]
  14. Lofgren, Hans & El-Said, Moataz, 2001. "Food subsidies in Egypt: reform options, distribution and welfare," Food Policy, Elsevier, vol. 26(1), pages 65-83, February. [Downloadable!] (restricted)
  15. 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 115, International Food Policy Research Institute (IFPRI). [Downloadable!]
  16. Bautista, Romeo M, et al, 2001. "Policy Bias and Agriculture: Partial and General Equilibrium Measures," Review of Development Economics, Blackwell Publishing, vol. 5(1), pages 89-104, February. [Downloadable!] (restricted)
  17. Löfgren, Hans & Robinson, Sherman & Thurlow, James, 2002. "Macro and micro effects of recent and potential shocks to copper mining in Zambia," TMD discussion papers 99, International Food Policy Research Institute (IFPRI). [Downloadable!]
  18. 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, Oxford University Press, vol. 2(3), pages 255-71, September.
  19. 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, vol. 10(1), pages 39-67. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fan, Shenggen & Chan-Kang, Connie & Mukherjee, Anit, 2005. "Rural and urban dynamics and poverty: Evidence from China and India," FCND discussion papers 196, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. 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. [Downloadable!]
    Other versions:
  3. Anderson, Kym & Valenzuela, Ernesto, 2006. "Do global trade distortions still harm developing country farmers ?," Policy Research Working Paper Series 3901, The World Bank. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!]
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  5. Anderson, Kym & Kurzweil, Marianne & Martin, Will & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Methodology for Measuring Distortions to Agricultural Incentives," Agricultural Distortions Working Paper 48326, World Bank. [Downloadable!]
  6. Baffes, John & De Gorter, Harry, 2005. "Disciplining agricultural support through decoupling," Policy Research Working Paper Series 3533, The World Bank. [Downloadable!]
  7. 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 52785, World Bank. [Downloadable!]
  8. Anderson, Kym, 2003. "Impact assessment of IFPRI's research and related activities based on economywide modeling," Impact assessments 21, International Food Policy Research Institute (IFPRI). [Downloadable!]
  9. Anderson, Kym, 2006. "Reducing distortions to agricultural incentives : progress, pitfalls, and prospects," Policy Research Working Paper Series 4092, The World Bank. [Downloadable!]
    Other versions:
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