Disciplining Agricultural Support Through Decoupling

77 Pages Posted: 1 Apr 2005

See all articles by John Baffes

John Baffes

World Bank

Harry de Gorter

Cornell University - School of Applied Economics and Management

Date Written: March 2005

Abstract

Agricultural protection and subsidies, particularly in high-income countries, have induced overproduction, thereby depressing world commodity prices and reducing export shares of countries which do not support agriculture. One - and perhaps the only - effective way to bring a socially acceptable and politically feasible reform is to replace payments linked to current production levels, input use, and prices by payments which are decoupled from these measures. This paper describes the objectives and consequences of agricultural support, surveys the theory and practice of decoupling agricultural support, and gives a number of policy recommendations on how to improve decoupled support mechanisms.

Overall, the experience with decoupling has been mixed while the switch to less distorting support has been uneven across commodities and countries. Ideally, compensation programs would be universal (open to all sectors in the economy, not just agriculture) or at least non-sector specific within agriculture. The paper describes a simple and minimally distorting scheme that would maintain government credibility and reduce uncertainty.

Suggested Citation

Baffes, John and de Gorter, Harry, Disciplining Agricultural Support Through Decoupling (March 2005). World Bank Policy Research Working Paper No. 3533. Available at SSRN: https://ssrn.com/abstract=695382

John Baffes (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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

Harry De Gorter

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-8076 (Phone)

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