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Policy bias and agriculture: partial and general equilibrium measures

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Author Info

  • Bautista, Romeo M.
  • Robinson, Sherman
  • Tarp, Finn
  • Wobst, Peter

Abstract

The paper examines the impact of industrial protection, agricultural export taxes, and overvaluation of the exchange rate on the balance between the agricultural and non-agricultural sectors. A variety of agricultural terms-of-trade indices are constructed to measure the policy bias against agriculture in a general equilibrium framework that incorporates traded and non-traded goods. These general equilibrium measures are compared to earlier work in a partial equilibrium framework assuming perfect substitutability between domestic and traded goods. Starting from a stylized computable general equilibrium (CGE) model of Tanzania, we simulate a 25 percent tariff on non-agriculture and a 25 percent export tax on agriculture. We also consider the impact of changes in the equilibrium exchange rate. The results indicate that the partial equilibrium measures miss much of the action operating through indirect product and factor market linkages, while overstating the strength of the linkages between changes in the exchange rate and prices of traded goods on the agricultural terms of trade.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series TMD discussion papers with number 25.

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Date of creation: 1998
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Handle: RePEc:fpr:tmddps:25

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Related research

Keywords: Terms of trade.; Equilibrium (Economics) Mathematical models.; Tanzania.; Computable general equilibrium (CGE).; Agricultural trade.;

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References

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  1. 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.
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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. Oskam, A.J. & Komen, M.H.C. & Wobst, P. & Yalew, A., 2004. "Trade policies and development of less-favoured areas: evidence from the literature," Food Policy, Elsevier, vol. 29(4), pages 445-466, August.
  3. Anderson, Kym & Valenzuela, Ernesto, 2005. "Do Global Trade Distortions Still Harm Developing Country Farmers?," CEPR Discussion Papers 5337, C.E.P.R. Discussion Papers.
  4. Cassing, James & Nassar, Saad & Siam, Gamal & Moussa, Hoda, 2007. "Distortions to Agricultural Incentives in Egypt," Agricultural Distortions Working Paper 48511, World Bank.
  5. 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.
  6. 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.
  7. Diaz-Bonilla, Eugenio & Robinson, Sherman & Thomas, Marcelle, 2002. "On boxes, contents, and users," TMD discussion papers 82, International Food Policy Research Institute (IFPRI).
  8. Bittencourt, Mauricio V.L., 2003. "Does The Stolper-Samuelson Theorem Hold With Less Trade Distortion?: A Computable General Equilibrium," 2003 Annual meeting, July 27-30, Montreal, Canada 22173, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Thilo Glebe & Uwe Latacz-Lohmann, 2007. "Agricultural multifunctionality and trade liberalisation," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 82, pages 57-73.

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