Optimal Food Price Stabilization in a Small Open Developing Country

Gouel, Christophe; Jean, Sebastien

dc.creator	Gouel, Christophe
dc.creator	Jean, Sebastien
dc.date	2012-03-19T17:28:39Z
dc.date	2012-03-19T17:28:39Z
dc.date	2012-01-01
dc.date.accessioned	2023-02-17T20:49:27Z
dc.date.available	2023-02-17T20:49:27Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120110112649
dc.identifier	http://hdl.handle.net/10986/3228
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/243590
dc.description	In poor countries, most governments implement policies aiming to stabilize the prices of staple foods, which often include storage and trade measures insulating their domestic market from the world market. It is of crucial importance to understand the precise motivations and efficiency of those interventions, because they can have consequences worldwide. This paper addresses those issues by analyzing the case of a small, open developing country confronted by shocks to both the crop yield and foreign price. In this model, government interventions may be justified by the lack of an insurance market for food prices. Considering this market imperfection, the authors design optimal public interventions through trade and storage policies. They show that an optimal trade policy largely consists of subsidizing imports and taxing exports, which benefits consumers at the expense of producers. Import subsidies alleviate the non-negativity of food storage. In other words, when stocks are exhausted, subsidizing imports prevents domestic price spikes. One striking result: an optimal storage policy on its own is detrimental to consumers, since its stabilizing benefits leak into the world market and it raises the average domestic price. By contrast, an optimal combination of storage and trade policies results in a powerful stabilizing effect for domestic food prices.
dc.language	English
dc.relation	Paper is funded by the Knowledge for Change Program (KCP),Policy Research working paper ; no. WPS 5943
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	AGRICULTURAL PRICE
dc.subject	AGRICULTURAL PRICES
dc.subject	AGRICULTURAL TRADE
dc.subject	AGRICULTURE
dc.subject	ARBITRAGE
dc.subject	ARBITRAGES
dc.subject	AVERAGE PRICE
dc.subject	AVERAGE PRICES
dc.subject	BARRIER
dc.subject	BARRIERS TO TRADE
dc.subject	BEHAVIOR OF PRICE
dc.subject	BENCHMARK
dc.subject	BINDING CONSTRAINTS
dc.subject	BORDER PRICE
dc.subject	BUFFER STOCKS
dc.subject	CASH FLOWS
dc.subject	CLOSED ECONOMY
dc.subject	COMMERCIAL POLICY
dc.subject	COMMODITIES
dc.subject	COMMODITY
dc.subject	COMMODITY PRICE
dc.subject	COMMODITY PRICES
dc.subject	CONSUMERS
dc.subject	DEMAND ELASTICITY
dc.subject	DEMAND FUNCTION
dc.subject	DEVELOPING COUNTRIES
dc.subject	DEVELOPING COUNTRY
dc.subject	DEVELOPING ECONOMY
dc.subject	DEVELOPMENT POLICY
dc.subject	DISCOUNTED VALUE
dc.subject	DISTRIBUTION OF TRADE
dc.subject	DOMESTIC MARKET
dc.subject	DOMESTIC MARKETS
dc.subject	DOMESTIC PRICE
dc.subject	DOMESTIC PRICES
dc.subject	DOMESTIC PRODUCTION
dc.subject	DOMESTIC STOCKS
dc.subject	ECONOMETRICS
dc.subject	ECONOMICS
dc.subject	EQUATIONS
dc.subject	EXCESS SUPPLY
dc.subject	EXPECTED UTILITY
dc.subject	EXPECTED VALUE
dc.subject	EXPECTED VALUES
dc.subject	EXPENDITURE
dc.subject	EXPENDITURES
dc.subject	EXPORT BANS
dc.subject	EXPORT PARITY
dc.subject	EXPORT RESTRICTIONS
dc.subject	EXPORT SUBSIDIES
dc.subject	EXPORT TAX
dc.subject	EXPORT TAXES
dc.subject	EXPORTS
dc.subject	FINANCIAL ASSETS
dc.subject	FOOD PRICE
dc.subject	FOOD PRICES
dc.subject	FOREIGN GOODS
dc.subject	FOREIGN TRADE
dc.subject	FREE TRADE
dc.subject	GLOBAL MARKET
dc.subject	GOVERNMENT INTERVENTIONS
dc.subject	IMPORT COMPETITION
dc.subject	IMPORT PARITY
dc.subject	IMPORTS
dc.subject	INCOME ELASTICITY OF DEMAND
dc.subject	INCOMPLETE MARKETS
dc.subject	INEFFICIENCY
dc.subject	INFLATION
dc.subject	INSURANCE
dc.subject	INSURANCE MARKET
dc.subject	INSURANCE MARKETS
dc.subject	INTEREST RATE
dc.subject	INTERNATIONAL COOPERATION
dc.subject	INTERNATIONAL ECONOMICS
dc.subject	INTERNATIONAL TRADE
dc.subject	INVENTORIES
dc.subject	INVENTORY
dc.subject	LOW-INCOME COUNTRIES
dc.subject	MARGINAL BENEFITS
dc.subject	MARGINAL COST
dc.subject	MARGINAL UTILITY
dc.subject	MARGINAL VALUE
dc.subject	MARKET EQUILIBRIUM
dc.subject	MONOPOLY
dc.subject	MULTIPLIERS
dc.subject	NATIONAL INCOME
dc.subject	NET EXPORTS
dc.subject	OPEN ECONOMY
dc.subject	OPPORTUNITY COST
dc.subject	OPPORTUNITY COSTS
dc.subject	OPTIMIZATION
dc.subject	OUTPUT
dc.subject	POLITICAL ECONOMY
dc.subject	PORTFOLIO
dc.subject	POSITIVE TARIFFS
dc.subject	PRICE BAND
dc.subject	PRICE CEILING
dc.subject	PRICE CHANGE
dc.subject	PRICE CHANGES
dc.subject	PRICE CURVE
dc.subject	PRICE CURVES
dc.subject	PRICE DISTORTIONS
dc.subject	PRICE ELASTICITY
dc.subject	PRICE ELASTICITY OF DEMAND
dc.subject	PRICE FLUCTUATIONS
dc.subject	PRICE INSTABILITY
dc.subject	PRICE LEVEL
dc.subject	PRICE LEVELS
dc.subject	PRICE POLICY
dc.subject	PRICE STABILITY
dc.subject	PRICE STABILIZATION
dc.subject	PRICE UNCERTAINTY
dc.subject	PRICE VOLATILITY
dc.subject	PRODUCTION FUNCTION
dc.subject	PROFIT SEEKING
dc.subject	PUBLIC POLICIES
dc.subject	PUBLIC POLICY
dc.subject	PURCHASING
dc.subject	REAL INCOME
dc.subject	RISK AVERSE
dc.subject	RISK AVERSION
dc.subject	RISK NEUTRAL
dc.subject	RISK PREMIUM
dc.subject	SALE
dc.subject	SAVINGS
dc.subject	SECURITY CONCERNS
dc.subject	SMALL COUNTRY
dc.subject	SMALL ECONOMY
dc.subject	SOCIAL WELFARE
dc.subject	STABILIZATION POLICIES
dc.subject	STABILIZATION POLICY
dc.subject	STOCK MARKET
dc.subject	STOCK PRICE
dc.subject	STOCKS
dc.subject	SUPPLY CURVES
dc.subject	SUPPLY ELASTICITY
dc.subject	SURPLUS
dc.subject	SURPLUSES
dc.subject	TARIFF POLICY
dc.subject	TARIFF REDUCTION
dc.subject	TAX
dc.subject	TAXATION
dc.subject	TERMS OF TRADE
dc.subject	TRADE BALANCE
dc.subject	TRADE BARRIER
dc.subject	TRADE DISCIPLINES
dc.subject	TRADE MODEL
dc.subject	TRADE MODELS
dc.subject	TRADE OPENNESS
dc.subject	TRADE POLICIES
dc.subject	TRADE POLICY
dc.subject	TRADE RESTRICTIONS
dc.subject	TRADE TAXES
dc.subject	TRADES
dc.subject	UTILITY FUNCTION
dc.subject	WEALTH
dc.subject	WORLD MARKET
dc.subject	WORLD MARKETS
dc.subject	WORLD TRADE
dc.title	Optimal Food Price Stabilization in a Small Open Developing Country
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	The World Region
dc.coverage	The World Region