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Tariff-Based Commodity Price Stabilization Schemes in Venezuela

51 Pages Posted: 20 Apr 2016  

Norbert Schady

World Bank - Development Research Group

Date Written: March 31, 1991

Abstract

Venezuela's agricultural sector is heavily regulated and protected. As part of structural adjustment, the government is considering major reform of its agricultural trade policies. The strategy is to introduce competition into the economy by removing government price controls and liberalizing trade. In 1990, the Government proposed a price stabilization scheme to ease the liberalization of quota-driven, price-managed domestic markets for several "essential" commodities - including maize, sorghum, rice, wheat, sugar, palm oil, soybeans and soybean products. The authors analyzed historical data to demonstrate the effects of several alternative stabilization schemes on domestic prices and government revenues. They also calculated average welfare benefits, including transfer and risk benefits, based on assumptions about risk aversion among producers. The effects of the various stabilization schemes on government revenues and producer welfare depend on both the crop and the method of stabilization chosen. Generally, the authors conclude that a wide price band, based on a moving average of nominal border prices, is the least offensive of the stabilization proposals, providing benefits when price movements are extreme but preserving average international price signals.

Keywords: Markets and Market Access, Insurance & Risk Mitigation, Environmental Economics & Policies, Economic Theory & Research, Access to Markets

Suggested Citation

Schady, Norbert, Tariff-Based Commodity Price Stabilization Schemes in Venezuela (March 31, 1991). World Bank Policy Research Working Paper No. 611. Available at SSRN: https://ssrn.com/abstract=615013

Norbert Schady (Contact Author)

World Bank - Development Research Group ( email )

1818 H Street NW
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/nschady

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