Price distortions in developing countries: A bias against agriculture

This article evaluates the effects of government intervention in agricultural commodity markets for a sample of developing countries. It also presents a review of the methodology for quantifying the effects of the distortions on prices, supply, demand, incomes, and foreign exchange. The empirical results indicate that the agricultural sector in developing countries is often heavily taxed. As a consequence, agricultural production is discouraged, while consumption is subsidized, and the increases in government revenue provided by taxation are counterbalanced by a loss of foreign exchange earnings.