Working Paper: CEPR ID: DP6436
Authors: Kym Anderson; Peter J. Lloyd; Donald Maclaren
Abstract: Australia?s lacklustre economic growth performance in the first four decades following World War II was in part due to an anti-trade, anti-primary sector bias in government assistance policies. This paper provides new annual estimates of the extent of those biases since 1946 and their gradual phase-out during the past two decades. In doing so it reveals that the timing of the sectoral assistance cuts was such as sometimes to improve but sometimes to worsen the distortions to incentives faced by farmers. Also, the changes increased the variation of assistance rates within agriculture during the 1950s and 1960s, reducing the welfare contribution of those programs in that period. While the assistance pattern within agriculture appears not to have been strongly biased against exporters, its reform has coincided with a substantial increase in export orientation of many farm industries. The overall pattern for Australia is contrasted with that revealed by comparable new estimates for other high-income countries.
Keywords: agricultural assistance; distorted incentives; manufacturing protection; trade policy reform
JEL Codes: F13; F14; Q17; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Antitrade and antiprimary sector biases in Australia’s industry assistance policies were extensive during the initial postwar years (F14) | Significant disincentives for farmers (Q15) |
| The timing of cuts in sectoral assistance (F35) | Antitrade and antiprimary sector biases have progressively diminished (F14) |
| Variation in industry assistance rates within the agricultural sector increased from the 1950s to the 1970s (N52) | Reduced welfare contribution of these programs due to increased misallocation of resources (H53) |
| Structure of assistance has not been as biased against export industries as seen in other countries (F14) | Some major export industries receiving assistance rates above the sectoral average (L65) |
| Overall pattern of distortions in Australia has been unique compared to other high-income countries (F61) | Significant reductions in both nominal and relative rates of assistance (I38) |