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An exact approach for evaluating the benefits from technological change

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  • Martin, Will
  • Alston, Julian M.

Abstract

It is commonly believed that taxing agricultural commodities in developing countries, and subsidizing agricultural commodities in industrial countries, reduces incentives in the developing countries for both current production and longer-term investments in capital, knowledge, technology, and infrastructure. It is argued that distortions in agricultural markets have kept investments in research and development, and productivity rates low in agriculture in developing countries. Martin and Alston lay the theoretical foundation for empirical studies of how such distortions affect returns to agricultural research and development in developing countries. Earlier studies of the benefits from technological change have typically used partial equilibrium models with Marshallian welfare measures. Such models have not allowed for a general set of market distortions and market interactions. Techniques recently developed for evaluating welfare in the context of general equilibrium models better measure the implications of trade distorting policies. Martin and Alston describe how to harness these approaches to evaluate the benefits and costs of technological changes. They show that a modified trade expenditure function can be used to measure welfare changes exactly, with a model consistent with the optimizing behavior of both producers and consumers. They do so in a general setting that allows for multiple market distortions and multiple paths of general equilibrium feedback. They illustrate this approach using a quadratic form for a profit function that is a component of the trade expenditure function. They spell out, in principle, how to apply this approach with minimal requirements for additional information, using the results from a computable general equilibrium model. They provide a diagram to illustrate the application of the technique.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1024.

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Date of creation: 31 Oct 1992
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Handle: RePEc:wbk:wbrwps:1024

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Related research

Keywords: Environmental Economics&Policies; Economic Theory&Research; Access to Markets; Markets and Market Access; Consumption;

References

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  1. Mayshar, Joram, 1990. "On measures of excess burden and their application," Journal of Public Economics, Elsevier, Elsevier, vol. 43(3), pages 263-289, December.
  2. Duncan, R & Tisdell, Clem, 1971. "Research and Technical Progress: The Returns to Producers," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 47(117), pages 124-29, March.
  3. Fulginiti, Lilyan E & Perrin, Richard K, 1993. "Prices and Productivity in Agriculture," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 471-82, August.
  4. Lloyd, P. J. & Schweinberger, A. G., 1988. "Trade expenditure functions and the gains from trade," Journal of International Economics, Elsevier, Elsevier, vol. 24(3-4), pages 275-297, May.
  5. Scobie, Grant M., 1976. "Who Benefits From Agricultural Research?," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 44(04), December.
  6. Goldin,Ian & Winters,L. Alan (ed.), 1992. "Open Economies," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521420563.
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Cited by:
  1. Ahmed, Mohamed M. & Masters, William A. & Sanders, John H., 1995. "Returns from research in economies with policy distortions: hybrid sorghum in Sudan," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 12(2), August.
  2. Templeton, Deborah J. & Griffith, Garry R. & Piggott, Roley R. & O'Donnell, Christopher J., 2004. "Measuring the Impact of Staple Strength-Enhancing Technologies on Australian Wool Producer Profits: A Duality-Based Approach," Working Papers, University of New England, School of Economics 12922, University of New England, School of Economics.
  3. Alston, Julian M. & Chalfant, James A. & Pardey, Philip G., 1993. "Structural Adjustment In Oecd Agriculture: Government Policies And Technical Change," Working Papers, University of Minnesota, Center for International Food and Agricultural Policy 14473, University of Minnesota, Center for International Food and Agricultural Policy.

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