Rethinking Grain Price Stabilization: The Philippine Case
The welfare effects of grain price stabilization depend on the stabilization instrument and the source of instability. If the source is international market price instability, then even an omniscient (perfect forecasting) and omnipotent (zero storage costs) government cannot increase welfare by price stabilization. Stabilization agencies should be downsized and converted to market integration and competitiveness enhancing agencies. In this way, international prices stabilize against domestic disturbances, and the remaining instability is welfare increasing.
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