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Reforming Hungarian agricultural trade policy : a quantitative evaluation

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  • Morkre, Morris
  • Tarr, David G.

Abstract

The authors quantitatively assess the consequences of Hungary for three types of policies: removing quantitative import restraints in agriculture, both for all of agriculture and for each of five separate agricultural products; removing the export subsidy program in agriculture; and adopting a European Community type common agricultural policy (CAP) system in Hungary. The authors estimate the consequences of all policies by using a small open economy computable general equilibrium model for Hungary, calibrated to the year 1990. They estimate the tariff equivalent of the import licenses through a detailed study of price comparisons, the first of itskind for Hungary. Imposing a CAP system they find, would be a costly step backward for Hungary, especially as the long run trend in Hungarian agricultural policy has been toward less intervention and more reliance on the market. A CAP system would significantly increase the government's fiscal problems. Import protection and export subsidies are costly, inefficient policies. The most important policy conclusion they contend, has to do with the piecemeal sequencing of reforms in the presence of both export subsidies and import licenses. Removing import licenses while export subsidies remain would generate byproduct distortions in the export market and little gain in welfare. The piecemeal removal of export subsidies, however, would not generate byproduct distortion, so substantial gains could be expected - but at the expense of greater adjustment costs. To facilitate understanding of this commonly used type of general equilibrium model, the authors explain the results by using supply and demand style graphs of the agricultural sector.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1185.

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Date of creation: 30 Sep 1993
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Handle: RePEc:wbk:wbrwps:1185

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Keywords: Access to Markets; Economic Theory&Research; Environmental Economics&Policies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Markets and Market Access;

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  1. Oblath, Gabor & Tarr, David, 1991. "The terms-of-trade effects from the elimination of state trading in Soviet - Hungarian trade," Policy Research Working Paper Series 690, The World Bank.
  2. Trela, Irene & Whalley, John & Wigle, Randall, 1987. " International Trade in Grains: Domestic Policies and Trade Impacts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(3), pages 271-83.
  3. de Melo, Jaime & Tarr, David, 1993. "Industrial Policy in the Presence of Wage Distortions: The Case of the U.S. Auto and Steel Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 833-51, November.
  4. de Melo, Jaime & Tarr, David, 1990. "Welfare Costs of US Quotas in Textiles, Steel and Autos," CEPR Discussion Papers 401, C.E.P.R. Discussion Papers.
  5. Tarr, David, 1990. "Quantifying second best effects in grossly distorted markets: The case of the butter market in Poland," Journal of Comparative Economics, Elsevier, vol. 14(1), pages 105-119, March.
  6. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-97, September.
  7. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1992. "Piecemeal trade reform in partially liberalized economies : an evaluation for Turkey," Policy Research Working Paper Series 951, The World Bank.
  8. Trela, Irene & Whalley, John, 1990. "Global Effects of Developed Country Trade Restrictions on Textiles and Apparel," Economic Journal, Royal Economic Society, vol. 100(403), pages 1190-1205, December.
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Cited by:
  1. Rutherford, Thomas F. & Tarr, David G., 2002. "Trade liberalization, product variety and growth in a small open economy: a quantitative assessment," Journal of International Economics, Elsevier, vol. 56(2), pages 247-272, March.
  2. Rutherford, Thomas F. & Tarr, David G., 1998. "Trade liberalization and endogenous growth in a small open economy : a quantitative assessment," Policy Research Working Paper Series 1970, The World Bank.
  3. Alexandre Gohin & Herve Guyomard & Chantal Le Mou�l, 2006. "Tariff protection elimination and Common Agricultural Policy reform: implications of changes in methods of import demand modelling," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1527-1539.
  4. Jensen, Jesper & Tarr, David, 2002. "Trade, foreign exchange, and energy policies in the Islamic Republic of Iran : reform agenda, economic implications, and impact on the poor," Policy Research Working Paper Series 2768, The World Bank.

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