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Do subsidies matter in food price stabilization? Evidences from Ethiopia in a computable general equilibrium framework

Author

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  • Woldie, Getachew Abebe
  • Siddig, Khalid

Abstract

In the poorest countries like Ethiopia the spillover effects of a soaring food price is unbearable. To mitigate the recent rise in food prices and the burden on urban poor consumers, policy makers have considered various measures. A recent shift from subsidizing oil to grain to ease the spiraling cost of food is one attempt the Ethiopian government has made so far. To this end, the government has removed an $800m annual subsidy on petroleum products and used the money to combat rising grain prices. Using the standard GTAP model and the recent GTAP Africa database, this paper simulates the overall implication of 5 and 10 percent increase of subsidy on wheat. Regarding the impact on prices, the simulation result tells us that prices have indeed fall. At macro level, the result reveals subsidy on wheat leads to a decline in the overall trade balance. In terms of welfare, the intervention is likely to have a positive impact.

Suggested Citation

  • Woldie, Getachew Abebe & Siddig, Khalid, 2009. "Do subsidies matter in food price stabilization? Evidences from Ethiopia in a computable general equilibrium framework," MPRA Paper 29117, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:29117
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    File URL: https://mpra.ub.uni-muenchen.de/29117/1/MPRA_paper_29117.pdf
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    References listed on IDEAS

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    1. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    2. Villoria, Nelson, 2008. "Estimation of Missing Intra-African Trade," GTAP Research Memoranda 2915, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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    Cited by:

    1. Aragie, Emerta Asaminew & Balié, Jean & Magrini, Emiliano & Morales Opazo, Cristian, 2016. "Can a cereal export ban affect a net food-importing economy? The case of Ethiopia," Conference papers 332747, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    Food policy; price policy; WTO; Ethiopia; GTAP;
    All these keywords.

    JEL classification:

    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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