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

Agricultural price stabilization policies are widely used to protect farmers from market volatility, yet their long-term consequences for production incentives and market efficiency remain poorly understood. This paper provides the first causal evaluation of Colombia's Dry Paddy Rice Storage Incentive Program, examining whether short-term price stabilization generated unintended distortions throughout the rice value chain. Using a Regression Discontinuity Design combined with Regression Kink Design on monthly data from 2013-2025, we estimate the program's effects on producer prices, farm revenues, production decisions, and consumer price transmission. The results show that the program achieved its primary objective of mitigating seasonal price declines and increasing producers short-term revenues. However, these gains came at the cost of altered production incentives. Higher expected returns encouraged additional planting, contributing to oversupply in subsequent harvests and reinforcing dependence on recurrent government intervention. While the program stabilized producer prices, it also weakened price transmission to consumers, limiting broader welfare gains and reducing market efficiency. These findings reveal a fundamental trade-off inherent in commodity price stabilization policies: interventions that effectively protect farmers in the short run may simultaneously create incentives that undermine long-run market adjustment and fiscal sustainability. Beyond the Colombian case, the study contributes causal evidence to the broader debate on agricultural stabilization policies in developing economies and highlights the importance of complementing temporary market support with investments that enhance productivity, competitiveness, and structural resilience.