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Modeling the Welfare Implications of Agricultural Policies in Developing Countries

Author

Listed:
  • Jonasson, Erik

    () (Department of Economics, Lund University)

  • Filipski, Mateusz

    () (University of California, Davis)

  • Brooks, Jonathan

    () (OECD)

  • Taylor, J. Edward

    () (University of California, Davis)

Abstract

This paper presents a new model which incorporates features of developing country agriculture that may be critical in shaping the welfare outcomes of alternative agricultural policies. The model features heterogeneous households linked through markets in a rural economy-wide structure, with endogenous market participation for farmers facing transactions costs. The model is used for policy simulations, including market price support, production subsidies, input subsidies, transaction cost removal, and unconditional cash transfers. Applications for six countries highlight the diversity of potential impacts of such policies. The simulation results suggest that there are circumstances under which some market interventions, such as input subsidies, may be only slightly less efficient at transferring incomes than direct payments.

Suggested Citation

  • Jonasson, Erik & Filipski, Mateusz & Brooks, Jonathan & Taylor, J. Edward, 2012. "Modeling the Welfare Implications of Agricultural Policies in Developing Countries," Working Papers 2012:11, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2012_011
    as

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    References listed on IDEAS

    as
    1. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
    2. Winters, Paul & Davis, Benjamin & Carletto, Gero & Covarrubias, Katia & Quiñones, Esteban J. & Zezza, Alberto & Azzarri, Carlo & Stamoulis, Kostas, 2009. "Assets, Activities and Rural Income Generation: Evidence from a Multicountry Analysis," World Development, Elsevier, vol. 37(9), pages 1435-1452, September.
    3. Filho, Joaquim Bento de Souza Ferreira & Horridge, Mark, 2005. "The Doha Round, poverty, and regional inequality in Brazil," Policy Research Working Paper Series 3701, The World Bank.
    4. Christopher B. Barrett & Paul A. Dorosh, 1996. "Farmers' Welfare and Changing Food Prices: Nonparametric Evidence from Rice in Madagascar," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 656-669.
    5. Hans Löfgren & Sherman Robinson, 1999. "Nonseparable Farm Household Decisions in a Computable General Equilibrium Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 663-670.
    6. Zezza, Alberto & Davis, Benjamin & Azzarri, Carlo & Covarrubias, Katia & Tasciotti, Luca & Anríquez, Gustavo, 2008. "The impact of rising food prices on the poor," ESA Working Papers 289027, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    7. Jonathan Brooks & Mateusz Filipski & Erik Jonasson & J. Edward Taylor, 2011. "The Development Policy Evaluation Model (DEVPEM): Technical Documentation," OECD Food, Agriculture and Fisheries Papers 51, OECD Publishing.
    8. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-1417, November.
    9. Saleem Shaik & Glenn A. Helmers & Joseph A. Atwood, 2005. "The Evolution of Farm Programs and Their Contribution to Agricultural Land Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1190-1197.
    10. Steve Boucher & J. Edward Taylor, 2006. "Subsistence Response to Market Shocks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 279-291.
    11. Davis, Benjamin & Winters, Paul & Carletto, Gero & Covarrubias, Katia & Quiñones, Esteban J. & Zezza, Alberto & Stamoulis, Kostas & Azzarri, Carlo & DiGiuseppe, Stefania, 2010. "A Cross-Country Comparison of Rural Income Generating Activities," World Development, Elsevier, vol. 38(1), pages 48-63, January.
    12. Rob Vos & Niek De Jong, 2003. "Trade Liberalization and Poverty in Ecuador: A CGE Macro-Microsimulation Analysis," Economic Systems Research, Taylor & Francis Journals, vol. 15(2), pages 211-232.
    13. John E. Floyd, 1965. "The Effects of Farm Price Supports on the Returns to Land and Labor in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 73, pages 148-148.
    14. Joe Dewbre & Jesús Antón & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
    15. Jonathan Brooks & Mateusz Filipski & Erik Jonasson & J. Edward Taylor, 2011. "Modelling the Distributional Implications of Agricultural Policies in Developing Countries: The Development Policy Evaluation Model (DEVPEM)," OECD Food, Agriculture and Fisheries Papers 50, OECD Publishing.
    16. Cororaton, Caesar B. & Cockburn, John, 2007. "Trade reform and poverty--Lessons from the Philippines: A CGE-microsimulation analysis," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 141-163.
    17. Nabil Annabi & Fatou Cissé & John Cockburn & Bernard Decaluwé, 2005. "Trade Liberalisation, Growth and Poverty in Senegal: a Dynamic Microsimulation CGE Model Analysis," Working Papers 2005-07, CEPII research center.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. About agricultural policies in developing economies
      by Economic Logician in Economic Logic on 2012-06-18 19:22:00

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    Cited by:

    1. J. Edward Taylor & Karen Thome, 2012. "A Methodology for Local Economy-wide Impact Evaluation (LEWIE) of Cash Transfers," One Pager 183, International Policy Centre for Inclusive Growth.

    More about this item

    Keywords

    agricultural household model; agricultural policy; simulation; transaction costs;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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