Does Storing Pay Off? Evidence from a Counterfactual Regression Discontinuity of Colombia’s Paddy Rice Storage Incentive (2013–2025)

This study evaluates the effectiveness of Colombia’s Dry Paddy Rice Storage Incentive Program (1997–2023), a policy instrument designed to stabilize rice prices and guarantee supply amid high seasonality and perishability. Using a regression discontinuity design (RDD) combined with regression kink discontinuity (RKD) elements and exploiting detailed daily and monthly price data, we analyze the program’s effects on paddy rice prices, farmers’ net margins, production decisions, and consumer prices. Results show that when mills actively participate, the program mitigates the seasonal decline in paddy prices, reversing pre-incentive downward trends and contributing to faster stabilization. In irrigated systems, the policy smooths producers’ incomes by reversing negative profit trajectories, while in non-irrigated systems effects are weaker and inconsistent. The program also induces extensive production responses, as higher incentives correlate with larger harvested areas, and alter the transmission between paddy and white rice prices. Despite these short-term benefits, the policy exhibits structural inefficiencies: limited coverage, fiscal dependence, and distortions leading to oversupply and reduced competitiveness. Findings suggest that while stock stabilization can buffer shocks, Colombia’s rice sector requires a transition toward differentiated, inclusive, and efficiency-enhancing instruments to ensure long-term sustainability, particularly in view of tariff elimination under international trade agreements. Overall, the findings recommend an orderly transition towards less distorting instruments differentiated by productive system.