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Decomposing changes in agricultural price gaps: an application to Russia

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  • William M. Liefert

Abstract

The article develops a method for decomposing changes in agricultural price gaps, defined as the difference between a commodity's domestic producer and border prices. We use OECD's procedure for decomposing changes in the market price support part of producer support estimates as the starting point for our decomposition method, and our method provides a basis for critiquing OECD's decomposition approach. The transmission of changes in border prices (world prices and the exchange rate) to domestic prices is a key element in the decomposition. The method is demonstrated using Russian agricultural price gaps. The results support the argument that for Russian agriculture during the transition period, the main cause of changes in price gaps has been incomplete transmission of changes in the exchange rate to domestic prices, and where the weak transmission results mainly not from policy intervention, but rather from deficient market conditions, in particular poor market infrastructure. The policy implication is that underdeveloped infrastructure has strongly limited the benefits to the Russian economy from agricultural trade liberalization.

Suggested Citation

  • William M. Liefert, 2009. "Decomposing changes in agricultural price gaps: an application to Russia," Agricultural Economics, International Association of Agricultural Economists, vol. 40(1), pages 15-28, January.
    • Handle: RePEc:bla:agecon:v:40:y:2009:i:1:p:15-28
    DOI: 10.1111/j.1574-0862.2008.00341.x
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    References listed on IDEAS

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    1. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
    2. Liefert, William M., 2005. "Decomposing Changes in Agricultural Price Gaps," Working Papers 14592, International Agricultural Trade Research Consortium.
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    5. Matthew Harley, 1996. "Use of the Producer Subsidy Equivalent as a Measure of Support to Agriculture in Transition Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 799-804.
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    8. Skully, David W., 2001. "Economics Of Tariff-Rate Quota Administration," Technical Bulletins 33576, United States Department of Agriculture, Economic Research Service.
    9. Stefan R Osborne & William M Liefert, 2004. "Price and Exchange Rate Transmission in Russian Meat Markets," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 46(2), pages 221-244, June.
    10. William M. Liefert & David J. Sedik & Robert B. Koopman & Eugenia Serova & Olga Melyukhina, 1996. "Producer Subsidy Equivalents for Russian Agriculture: Estimation and Interpretation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 792-798.
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