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Abstract

In 2011 the Thai Government pledged to pay rice producers 50 per cent more than the going market price. The surplus has gone into Government stocks. While supporting local farmers, the Government also hoped to drive up world prices by withholding supplies from the world market and make a speculative profit by selling the stocks at a higher price. It is now clear that the policy has in fact depressed world prices and the Government has a mountain of rice to dispose of. Furthermore, the stocks are starting to spoil, and there has been an upsurge in smuggling to take advantage of inflated prices. Competing exporters have increased supplies to the international market. This study analyses the welfare effects of various Thai rice policy options using a dynamic, stochastic, ten-region, partial equilibrium model of world rice trade. While the Thai policy was effective in supporting the incomes of rice producers in the short run, the burden imposed on taxpayers and consumers seems difficult to justify.

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