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Rules versus Discretion in Food Storage Policies

Listed author(s):
  • Christophe Gouel

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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File URL: http://hdl.handle.net/10.1093/ajae/aat016
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 95 (2013)
Issue (Month): 4 ()
Pages: 1029-1044

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Handle: RePEc:oup:ajagec:v:95:y:2013:i:4:p:1029-1044
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