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Agricultural Policy Support, Production Incentives and Market Distortions in Sub-Saharan Africa

dc.contributor.advisorvon Cramon-Taubadel, Stephan Prof. Dr.
dc.contributor.authorBalie, Jean
dc.titleAgricultural Policy Support, Production Incentives and Market Distortions in Sub-Saharan Africade
dc.contributor.refereeBrümmer, Bernhard Prof. Dr.
dc.description.abstractengMost countries in the world adopt policies in support of their agricultural sectors. In doing so, governments seek to influence farmers’ behaviour through various channels. While these policies and their incidence have long been monitored for member countries of the Organization for Economic Cooperation and Development (OECD), there is scarce literature on those provided by the developing countries and especially in Sub Saharan Africa (SSA). Yet, the food and agricultural policies adopted by governments in Sub Saharan Africa (SSA) since their respective independences have gone through a number of phases characterized by changing objectives, intensities of state intervention in the economy, levels of protection or taxation in agriculture, and amounts of public spending and aid to agriculture. There has not been any systematic tracking of these changes and their implications for agricultural development and rural transformation, poverty eradication and food security, for example. In this respect, the work by Kym Anderson as part of the World Bank’s research project on Distortion to Agricultural Incentives constituted a major breakthrough. FAO’s Monitoring and Analysing Food and Agricultural Policies (MAFAP) programme followed this path with the objective of establishing country-owned and sustainable systems to monitor, analyse, and reform food and agricultural policies to enable more effective, efficient and inclusive policy frameworks in support of agricultural development in a growing number of developing and emerging economies. Most of the research underpinning this dissertation builds on MAFAP data and analyses. The dissertation focuses on policy interventions essentially in the form of market price support or budgetary transfers, and their combined incidence on market price signal transmission, agricultural production incentives and the resulting supply response. Results presented in chapter 2 show that policies adopted by governments, for example, in response to price shocks in international markets altered the transmission of international price signals to farmers in developing countries. We also find that other factors play a role in this inadequate price transmission such as transport costs and changes in exchange rates. Moreover, it also appears that price changes in any particular country are not necessarily due to changes in world market prices, which suggests that domestic market conditions, largely determined by the policy environment, play an essential role. Finally, we also find that price movements in Africa exhibit different patterns than those in other regions, with higher levels of price variability for maize and rice mostly due to the domestic market conditions. Taking the case of rice and cotton which are two key commodities for several SSA countries, chapter 3 shows that observed market distortions reflect the combined effects of market and policy failures. In the case of rice, these prevent border protection from reaching farmers while raising consumer prices. Cotton ginning and marketing is concentrated in a small number of private sector companies in most countries studied. Farm level nominal rates of protection (NRPs) provide evidence of market failures in these countries that may be mitigated by policies that set indicative prices and encourage competition. Interestingly, the NRPs point at non-market failures in the two countries that maintain parastatal monopsonies for cotton. Chapter 4 focuses on inputs subsidies which are found to be a widespread option of public support to agricultural production in SSA. Input subsidies have received close to 35 % of agricultural-specific spending on average. These expenditures have tended to get stuck into agricultural budgets over time, and exhibit sub-optimal execution rates. Input subsidies are primarily funded by national taxpayer money while donors tend to invest more on public goods. These findings confirm that input subsidies tend to crowd out other spending categories likely more supportive of long-term agricultural development objectives. The effects of market price signals and policy interventions on the supply response of farmers in SSA are investigated in chapter 5. Results show that farmers in SSA are actually able to respond to higher prices with increased production even if with a limited intensity. Moreover, results show that direct price incentives arising from border protection and government intervention in domestic markets and price shocks at the border also influence farmers’ decisions and are more important than macroeconomic policies. Moreover, omitting marketing costs from the supply response function leads to an underestimation of the price elasticity. Conversely, using wholesale instead of farm gate prices as proxy for producer prices leads to an overestimation of the price elasticity of
dc.contributor.coRefereeDe Haen, Hartwig Prof. Dr.
dc.subject.engpolicy support, price analysis, market distortions, Africade
dc.affiliation.instituteFakultät für Agrarwissenschaftende
dc.subject.gokfullLand- und Forstwirtschaft (PPN621302791)de

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