Novel Indicators of the Trade and Welfare Effects of Agricultural Distortions in OECD Countries
43 Pages Posted: 20 Apr 2016
Date Written: August 1, 2010
Agricultural markets in OECD countries have long been highly distorted by government policies. Traditional weighted average aggregates of the price distortions involved, such as producer and consumer support estimates can be poor indicators of the trade restrictiveness and economic welfare losses associated with them, especially if a country's support estimates vary a lot across the product range. Certainly estimates of trade and welfare effects of price supports can be obtained from sector or economy-wide models using price elasticity estimates, but the results can be contentious if there is no consensus on what model specification and elasticity parameters to use. This paper shows that, if there is a willingness to accept simple assumptions about elasticities, it is possible to generate indicators of the welfare and trade restrictiveness of agricultural policies using no more than the price and quantity data needed to generate producer and consumer support estimates. These new indexes thus provide an attractive supplement to the current policy monitoring regime developed by the OECD Secretariat.
Keywords: Economic Theory & Research, Markets and Market Access, Emerging Markets, Crops and Crop Management Systems, Free Trade
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