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Abstract
This paper summarizes a new database that sheds light on the impact of trade-related policy
developments over the past half century on distortions to agricultural incentives and thus also
to consumer prices for food in 75 countries spanning the per capita income spectrum. Price-support
policies of advanced economies hurt not only domestic consumers and exporters of
other products but also foreign producers and traders of farm products, and they reduce
national and global economic welfare. On the other hand, the governments of many
developing countries have directly taxed their farmers over the past half-century, both
directly (e.g., export taxes) and also indirectly via overvaluing their currency and restricting
imports of manufactures. Thus the price incentives facing farmers in many developing
countries have been depressed by both own-country and other countries’ agricultural price
and international trade policies. We summarize these and related stylized facts that can be
drawn from a new World Bank database that is worthy of the attention of political economy
theorists, historians and econometricians. These indicators can be helpful in addressing such
questions as the following: Where is there still a policy bias against agricultural production?
To what extent has there been overshooting in the sense that some developing-country food
producers are now being protected from import competition along the lines of the examples
of earlier-industrializing Europe and Japan? What are the political economy forces behind the
more-successful reformers, and how do they compare with those in less-successful countries
where major distortions in agricultural incentives remain? And what explains the pattern of
distortions across not only countries but also industries and in the choice of support or tax
instruments within the agricultural sector of each country?