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PSEs and the Mix of Measures to Support Farm Incomes

PSEs and the Mix of Measures to Support Farm Incomes SUMMARY AND CONCLUSIONS In summary, the mix of support provided to agriculture does matter when PSEs are to be cut. Across‐the‐board reductions in individual components of PSEs will have different implications for output, exports, land values and employment in different countries. These differences can be systematically related to the type of instruments used to support agriculture. For example, cutting subsidies on an input such as fertilizer can result in greater long‐run reductions in output, exports and employment in agriculture than would cuts in output subsidies (of equal magnitude). These differences may make it attractive for countries engaging in partial liberalization to change the mix of subsidies, even as they reduce their aggregate PSE. In so doing, they may be able to lessen, or even eliminate, some of the deleterious effects of reduced farm support. For example, the United States could maintain the demand for farm labour, while cutting its aggregate PSE in half, by shifting the mix of farm support towards selected input subsidies. By contrast, there appears to be little incentive for substituting export subsidies for output subsidies under the ‘pure’ PSE approach proposed by Professor Tangermann et al. This is because such a switch would have to be accompanied by further reductions in budgetary outlays in order to avoid exceeding the PSE target agreed in negotiations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The World Economy Wiley

PSEs and the Mix of Measures to Support Farm Incomes

Hertel, Thomas W.
The World Economy , Volume 12 (1) – Mar 1, 1989
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References (1)

Publisher
Wiley
Copyright
Copyright © 1989 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0378-5920
eISSN
1467-9701
DOI
10.1111/j.1467-9701.1989.tb00460.x
Publisher site
See Article on Publisher Site

Abstract

SUMMARY AND CONCLUSIONS In summary, the mix of support provided to agriculture does matter when PSEs are to be cut. Across‐the‐board reductions in individual components of PSEs will have different implications for output, exports, land values and employment in different countries. These differences can be systematically related to the type of instruments used to support agriculture. For example, cutting subsidies on an input such as fertilizer can result in greater long‐run reductions in output, exports and employment in agriculture than would cuts in output subsidies (of equal magnitude). These differences may make it attractive for countries engaging in partial liberalization to change the mix of subsidies, even as they reduce their aggregate PSE. In so doing, they may be able to lessen, or even eliminate, some of the deleterious effects of reduced farm support. For example, the United States could maintain the demand for farm labour, while cutting its aggregate PSE in half, by shifting the mix of farm support towards selected input subsidies. By contrast, there appears to be little incentive for substituting export subsidies for output subsidies under the ‘pure’ PSE approach proposed by Professor Tangermann et al. This is because such a switch would have to be accompanied by further reductions in budgetary outlays in order to avoid exceeding the PSE target agreed in negotiations.

Journal

The World Economy – Wiley

Published: Mar 1, 1989

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