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Abstract

Government intervention changes the allocation of resources through effects on input and output prices. While explicit forms of intervention have been the subject of many studies, implicit forms of intervention have been given much less attention. The price and output policies pursued by public authorities systematically cross-subsidise from densely populated to sparsely populated areas. Thus, their effects are in the opposite direction from the effects of tariffs and quotas. Examination of the effects of one form of intervention in isolation overstates the net effects of that intervention. Effective rates of cross-subsidies must be taken into consideration when attempting to measure the impact of government intervention on resource allocation.

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