The impacts of reforming agricultural policy support on cereal prices: a CGE modeling approach
ISSN: 0144-3585
Article publication date: 2 June 2023
Issue publication date: 2 January 2024
Abstract
Purpose
This paper investigates the effects of the total abolition of all forms of agricultural subsidies to producers and border tariffs on the prices of staple cereals.
Design/methodology/approach
The authors use the GTAP global economy-wide model and focus on 27 countries and 8 regions. The GTAP database that is used contains information on budgetary transfers to producers and market price support such as domestic price support, tariffs, export subsidies, quotas on exports or imports and other border measures.
Findings
The removal of subsidies is estimated to significantly increase the prices of wheat and other cereal grains in Japan, paddy rice in Malaysia and Indonesia, processed rice in Malaysia and Indonesia and wheat in Brazil and India. When border tariffs are removed, cereal prices are projected to fall in several countries, but the decline is more pronounced for wheat in Kenya and Japan, other cereal grains in South Korea and all staples in Nepal.
Research limitations/implications
The alternative scenarios on the removal of agricultural subsidies in all agricultural sectors and the elimination of border tariffs are purely speculative as the analysis ignores important political economy considerations of agricultural and food policy reforms.
Practical implications
The findings from this study point to the importance of implementing additional policy measures to mitigate the possible negative effect of repurposing the support to agriculture and ensure the food security and welfare of those categories of buyers who heavily depend on the price of staple food for their livelihoods.
Social implications
This study’s findings confirm that the elimination of agricultural subsidies would impact global food security directly by making staple food less affordable to the poorest and indirectly by decreasing the available household budget for other presumably more nutritious food groups. Consequently, it is expected that these price increases could make segments of the world population poorer, particularly the net-food buyers due to a decline in their real income.
Originality/value
The authors assess the impact of removing the subsidies on the economy in a comprehensive way, particularly given the recent policy focus on net zero emissions and Sustainable Development Goals that include healthy foods. The authors also consider the counter effects of tariff reduction on this, which is price-reducing.
Keywords
Acknowledgements
Authors would like to thank the two anonymous reviewers and the editor for their helpful comments and suggestions on our manuscript. The authors acknowledge the funding support from the CGIAR research program on RICE, the CGIAR Initiative on Foresight, and the CGIAR Initiative on Market Intelligence.
Citation
Valera, H.G.A., Gopalakrishnan, B.N., Chakravarthy, S., Bharathi, S., Balié, J. and Pede, V.O. (2024), "The impacts of reforming agricultural policy support on cereal prices: a CGE modeling approach", Journal of Economic Studies, Vol. 51 No. 1, pp. 202-221. https://doi.org/10.1108/JES-06-2022-0362
Publisher
:Emerald Publishing Limited
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