Measuring Agricultural Policy Bias: General Equilibrium Analysis of Fifteen Developing Countries

The measurement issue is the key issue in the literature on trade policy-induced agricultural price incentive bias. This paper introduces a general equilibrium effective rate of protection (GE-ERP) measure, which extends and generalizes earlier partial equilibrium nominal protection measures. For the 15 sample countries, the results indicate that the agricultural price incentive bias, which was generally perceived to exist during the 1980s, was largely eliminated during the 1990s. The results also demonstrate that general equilibrium effects and country-specific characteristics – including trade shares and intersectoral linkages – are crucial for determining the sign and magnitude of trade policy bias. The GE-ERP measure is therefore uniquely suited to capture the full impact of trade policies on agricultural price incentives. A Monte Carlo procedure confirms that the results are robust with respect to tradability assumptions.