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GTAP Resource #3651

"Welfare and Price Impacts of Price-Insulating Policies"
by Ivanic, Maros, Will Martin and Aaditya Mattoo

In this paper we analyze the impacts on welfare and poverty of policies that insulate domestic food prices from international prices. Varying protection rates in order to insulate domestic prices from movements in international prices appears to be a very common approach to attempting to stabilize domestic prices. When prices rise, this involves exporters introducing and/or raising export barriers—which will create economic efficiency losses but improve their terms of trade. For importers, reductions in import duties are a common response, with gains in economic efficiency, but potential terms-of-trade losses. When many countries follow this policy, the stabilizing impact on domestic prices is, on average, eliminated, although countries that insulate more than others may experience reductions in price volatility, while those who insulate less may experience increases in price volatility.

This paper will provide estimates of the impacts of changes in price distortions in major economies for domestic prices and national economic welfare, taking into account the impacts of changes in countries’ own policies and those of their trading partners during key periods of price instability in world commodity markets. Our methodology uses the short-run GTAP-AGR model and the set of detailed estimates of distortions to agricultural incentives estimates estimated in the global agricultural distortions project. By aggregating these individual impacts, we are able to evaluate whether domestic prices in each country/region were stabilized or destabilized by price insulating policies, and to assess the impacts on economic welfare of these policies. For key countries, we will assess the impacts on individual, households in order to form an initial assessment of the impacts of these policies for poverty and food security.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Martin, W. (4/15/2011)
Updated: Ivanic, M. (7/12/2011)
Visits: 1,863
- Agricultural policies

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