The political economy of agricultural pricing policy : volume 4 - a synthesis of the economics in developing countries

Abstract

The core of this study is an in-depth analysis of the economic effects of agricultural economic interventions in eighteen developing countries during the period from 1960 to 1985. The theoretical approach of this study includes the economic effects of indirect interventions (including industrial protection and macroeconomic policies). Despite their importance, they are usually excluded because they are exceedingly difficult to quantify. In its appeal to data and to quantitative analysis, this study rates high. It shows that indirect tax on agriculture was about 22 percent and the direct tax from agricultural pricing policies was about 8 percent. Transfers of resources out of agriculture were enormous. On average the net effects of direct and indirect interventions were 46 percent of the agricultural gross domestic product a year during 1960-84. The modernization of agriculture was being sacrificed at the altar of industrialization. The price that these developing countries were paying for their bad economic policies was very costly. In addition to quantifying the impact of direct and indirect policies on agricultural incentives, the study also measures the effect on output, consumption, trade, the government budget, intersectoral real income transfers, and income distribution. What is not quantified is the large increase in income that can be had from an economically efficient allocation of the resources of these developing countries.