Following a brief discussion of the theoretical reasons for government intervention in agricultural markets, Mattias Lundberg lists the major types of interventions. They include price interventions, quantity restrictions on imports, exports, domestic supply, or domestic demand, and direct market interventions. The focus of the note is primarily the reforms of the marketing boards and other parastatal or quasi-governmental entities that undertake the direct interventions.
Agricultural Market Reforms:
English (343kb PDF)
The author supplies an extensive summary and analysis of the reforms implemented in agriculture, particularly among the marketing boards. The types of reforms undertaken in the first wave of structural adjustment (mainly during the 1980s) were generally large scale, including the removal of trade restrictions and the devolution or dissolution of parastatal agencies. The agricultural market reforms were designed to reduce or eliminate distortions in the sector and introduce market forces in agriculture. The second wave of reforms is focusing more on issues of governance and performance, that is, on deregulation, support for the private sector, and risk management through insurance rather than direct intervention. The note takes the view that state intervention in agricultural markets has often provided opportunities for rent-seeking and capture, and has often been unable to achieve even limited goals.
The best method for examination of the impact of reforms is a combination of economic theory and common sense. The analysis should always begin with a description of the sector that has been or will be affected and the sectors that interact with that sector in any significant way. The analyst must also understand the history of agricultural policy in the country. Furthermore, the characteristics of the commodities themselves may influence the design and impact of reforms. Are the products traded or not traded? Do they provide tax revenue to the government, or are they a drain on government resources? In addition, it is necessary to understand the stakeholders. This requires some examination of the benefit incidence, even casually, of current policies. What rents will be taken away and from whom? What benefits are expected in the short run and in the long run?
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