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Rules versus Discretion in Food Storage Policies

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  • Christophe Gouel

Abstract

This article compares various policies in a rational expectations food storage model with risk-averse consumers and missing insurance markets calibrated to represent a developing country. I consider an optimal storage policy under discretion and two optimal simple rules: a constant private storage subsidy and a price band. The storage subsidy achieves welfare gains similar to the discretionary policy. The price band maximizing social welfare is a price-peg scheme: The floor and ceiling prices are the same, and the capacity constraint represents 11% of the steady-state production level. This price band achieves three-quarters of the gains from the optimal policy under discretion. Copyright 2013, Oxford University Press.

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  • Christophe Gouel, 2013. "Rules versus Discretion in Food Storage Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(4), pages 1029-1044.
    • Handle: RePEc:oup:ajagec:v:95:y:2013:i:4:p:1029-1044
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    Cited by:

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    2. Chavas, Jean-Paul & Li, Jian, 2017. "The Effects of Private Stocks versus Public Stocks on Food Price Volatility," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259185, Agricultural and Applied Economics Association.
    3. Matthias Kalkuhl & Lukas Kornher & Matthias Kalkuhl & Irfan Mujahid, 2015. "Food price volatility in developing countries – the role of trade and storage," EcoMod2015 8415, EcoMod.
    4. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    5. Christophe Gouel & Madhur Gautam & Will J. Martin, 2016. "Managing food price volatility in a large open country: the case of wheat in India," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 811-835.
    6. Christian Elleby, 2014. "Poverty and Price Transmission," IFRO Working Paper 2015/01, University of Copenhagen, Department of Food and Resource Economics.
    7. Emerta A. Aragie & Jean Balié, 2024. "The effect of price support policies under productivity shocks: evidence from an economywide model," International Economics and Economic Policy, Springer, vol. 21(1), pages 1-26, February.
    8. Jean‐Paul Chavas & Jian Li, 2020. "A quantile autoregression analysis of price volatility in agricultural markets," Agricultural Economics, International Association of Agricultural Economists, vol. 51(2), pages 273-289, March.
    9. Oglend, Atle & Kleppe, Tore Selland, 2017. "On the behavior of commodity prices when speculative storage is bounded," Journal of Economic Dynamics and Control, Elsevier, vol. 75(C), pages 52-69.
    10. Lukas Kornher & Matthias Kalkuhl, 2015. "A Typology for Price-related Food and Nutrition Risks and Policy Responses," FOODSECURE Technical papers 5, LEI Wageningen UR.
    11. Kennedy P. Lynn & Schmitz Andrew & van Kooten G. Cornelis, 2020. "The Role of Storage and Trade in Food Security," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 18(1), pages 1-13, January.

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