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General Equilibrium Measures of Agricultural Policy Bias in Fifteen Developing Countries

  • Henning Tarp Jensen

    (Institute of Economics, University of Copenhagen)

  • Sherman Robinson

    (Department of Economics, University of Sussex)

  • Finn Tarp

    (Institute of Economics, University of Copenhagen)

A comparative analysis of 15 developing countries shows that, during the 1990s, indirect taxes, tariffs, and exchange rates significantly discriminated against agriculture in only one country (Malawi), was largely neutral in five (Argentina, Brazil, Costa Rica, Indonesia, and Zimbabwe), provided a moderate subsidy to agriculture in four (Mexico, Tanzania, Venezuela, and Zambia), and strongly favored agriculture in five (Egypt, Korea, Morocco, Mozambique, and Tunisia). In contrast to earlier partial equilibrium results, our general equilibrium analysis indicates that exchange rate changes can lead to anything between strongly increasing and strongly decreasing relative agriculture/non-agriculture incentives, depending on relative trade shares and relative tradability of agricultural and non-agricultural commodities. Country-specific circumstances greatly affect the relative impact of trade policies on agriculture and the rest of the economy in a general equilibrium setting. Earlier partial equilibrium measures of policy bias could not adequately incorporate country heterogeneity and are therefore likely to have overstated the bias. In any case, from the empirical results with our sample of countries, we conclude that any incentive bias against agriculture in the 1980s had mostly disappeared by the 1990s.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 04-25.

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Length: 14 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:kud:kuiedp:0425
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  1. Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Tarp, Finn, 1999. "Marketing margins and agricultural technology in Mozambique:," TMD discussion papers 43, International Food Policy Research Institute (IFPRI).
  2. Majumdar, Sumon & Mani, Anandi & Mukand, Sharun W., 2004. "Politics, information and the urban bias," Journal of Development Economics, Elsevier, vol. 75(1), pages 137-165, October.
  3. Harris, Rebecca Lee, 2001. "A computable general equilibrium analysis of Mexico's agricultural policy reforms," TMD discussion papers 65, International Food Policy Research Institute (IFPRI).
  4. Löfgren, Hans & Robinson, Sherman & Thurlow, James, 2002. "Macro and micro effects of recent and potential shocks to copper mining in Zambia," TMD discussion papers 99, International Food Policy Research Institute (IFPRI).
  5. Jensen, Henning Tarp & Robinson, Sherman & Tarp, Finn, 2002. "General equilibrium measures of agricultural policy bias in fifteen developing countries," TMD discussion papers 105, International Food Policy Research Institute (IFPRI).
  6. Arndt, Channing & Jensen, Henning Tarp & Tarp, Finn, 2000. "Structural Characteristics of the Economy of Mozambique: A SAM-Based Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 292-306, October.
  7. Bautista, Romeo M. & Robinson, Sherman & Tarp, Finn & Wobst, Peter, 2001. "Policy Bias and Agriculture: Partial and General Equilibrium Measures," MPRA Paper 29473, University Library of Munich, Germany.
  8. Lofgren, Hans & El-Said, Moataz, 2001. "Food subsidies in Egypt: reform options, distribution and welfare," Food Policy, Elsevier, vol. 26(1), pages 65-83, February.
  9. Ahmed, Akhter U. & Gutner, Tamar & Lofgren, Hans & Bouis, Howarth E., 2001. "The Egyptian food subsidy system: structure, performance, and options for reform," Research reports 119, International Food Policy Research Institute (IFPRI).
  10. Kherallah, Mylene & Lofgren, Hans & Gruhn, Peter & Reeder, Meyra M., 2000. "Wheat policy reform in Egypt: adjustment of local markets and options for future reforms," Research reports 115, International Food Policy Research Institute (IFPRI).
  11. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2002. "Developing Countries and the Gains from Regionalism: Links between Trade and Farm Policy Reforms in Mexico," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 736-748.
  12. Devarajan, Shantayanan & Sussangkarn, Chalongphob, 1992. "Effective Rates of Protection When Domestic and Foreign Goods Are Imperfect Substitutes: The Case of Thailand," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 701-11, November.
  13. Guanghua Wan & Amelia U. Santos-Paulino, 2008. "Introduction," The World Economy, Wiley Blackwell, vol. 31(10), pages 1273-1276, October.
  14. Henning Tarp Jensen & Finn Tarp, 2002. "CGE Modelling and Trade Policy: Reassessing The Agricultural Bias," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(2), pages 383-405.
  15. Tarp, Finn & Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Heltberg, Rasmus, 2002. "Facing the development challenge in Mozambique: an economywide perspective," Research reports 126, International Food Policy Research Institute (IFPRI).
  16. Robinson, Sherman & El-Said, Moataz & San, Nu Nu, 1998. "Rice policy, trade, and exchange rate changes in Indonesia: a general equilibrium analysis," TMD discussion papers 27, International Food Policy Research Institute (IFPRI).
  17. Amelia Santos-Paulino & A.P. Thirlwall, 2004. "Trade Liberalisation And Economic Performance In Developing Countries - Introduction," Economic Journal, Royal Economic Society, vol. 114(493), pages F1-F3, 02.
  18. Cattaneo, Andrea & Ojeda, Raul A. Hinojosa- & Robinson, Sherman, 1999. "Costa Rica trade liberalization, fiscal imbalances, and macroeconomic policy: a computable general equilibrium model," The North American Journal of Economics and Finance, Elsevier, vol. 10(1), pages 39-67.
  19. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
  20. de Melo, Jaime & Robinson, Sherman, 1981. "Trade Policy and Resource Allocation in the Presence of Product Differentiation," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 169-77, May.
  21. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, vol. 2(3), pages 255-71, September.
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