Price Distortions in Agriculture and Their Effects: An International Comparison

Abstract The central thesis of this paper is that agricultural pricing policies pursued by developing countries produce effects which are diametrically opposite to those produced by the pricing policies of many developed countries, and that the policies of both are costly in terms of global welfare. In general, the agricultural sector in developing countries is heavily taxed while that in the developed countries receives substantial price protection. The effects of agricultural price distortions on output, consumption, trade, and rural employment are estimated for nine countries. In addition, the effects of price distortions on the distribution of income between producers and consumers, on government revenue and foreign exchange, and the net social losses of the policies are calculated.