Working Paper: NBER ID: w2583
Authors: John Whalley; Randall M. Wigle
Abstract: This paper argues that a price wedge treatment of agricultural supports can seriously misrepresent their welfare and quantity effects. We make our point by focusing on pre-1985 US wheat programs, but features of programs in many other countries lead to comparable problems with the ad valorem approach. This line of argument raises questions over the current approach in the multilateral trade negotiations of negotiating on producer subsidy equivalents (PSEs), or some other subsidy-like measure.
Keywords: Agricultural Support Programs; Wheat; General Equilibrium Model
JEL Codes: Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in price supports (E64) | entry of previously non-participating farms into the program (Q12) |
| entry of previously non-participating farms into the program (Q12) | overall production (E23) |
| increase in price supports (E64) | set-asides that reduce planted acreage (Q15) |
| set-asides that reduce planted acreage (Q15) | overall production (E23) |
| elimination of price supports (E64) | decrease in US wheat output (N52) |
| agricultural support programs (Q18) | social costs (J32) |
| elimination of price supports (E64) | reduction in land rents (R21) |