Food‐Pricing Policy in Developing Countries: Further Evidence on Cereal Producer Prices

Abstract

Abstract Recently, two independent studies have produced contradicting evidence regarding the extent of price discrimination in developing countries. The objective of this study is to reexamine the evidence of direct and indirect distortion in cereal producer prices. Nominal protection coefficients for wheat, maize, and rice are calculated for fifty‐one developing countries spanning the period 1980–86. Black market exchange rates are used to adjust the nominal protection coefficients to reflect the indirect effect of price interventions through exchange rate policies. The results confirm the conventional wisdom that, although developing countries tend to protect domestic cereal producers, taxation caused by overvaluation of official exchange rates exceeds any direct price protection offered domestic producers.