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Abstract

The issue of the international buffer stock scheme for the stabilization of prices of primary commodities came to forefront in the mid 1970's. This survey aims at highlighting some critical issues with a selective review of the major recent contributions in the area. The analytical work on commodity price stabilization started with the works of Waugh in 1944, Oi in 1961 and Massel in 1969. Johnson (1976) clarified some of the underlying assumptions and showed the impact on revenue under different supply and demand conditions. Among others, Behrman (1979) and Vines (1984) provided empirical and analytical support to the argument. One outstanding contribution in the area is that of Newbery and Stiglitz (1981) whose theoretical work and empirical estimates tend to reject the case for price stabilization. Kanbur (1984) shows that the analysis of Newbery and Stiglitz (1981) is largely microeconomic that ignores the potential macroeconomic benefit emphasized by Kaldor (1976, 1983).

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