Partial equilibrium indicators of trade and welfare impacts of global distortions to agricultural markets

Abstract

Despite recent reforms, world agricultural markets remain highly distorted by government policies. Traditional indicators of those price distortions such as nominal rates of assistance and consumer tax equivalents (or the OECD Seretariat’s PSEs and CSEs) can be poor guides to the policies’ economic effects. Recent theoretical literature, particularly by James Anderson and Peter Neary, provides scalar index numbers of trade- and welfare-reducing effects of price and trade policies which this paper builds on to develop more-satisfactory indexes that can be generated using no more than the data used to generate PSEs and CSEs. We then exploit the World Bank’s new Agricultural Distortions database to provide time series estimates over the past half century of index numbers for 75 developing and high-income countries and for regions and the world as a whole.