Description:
Despite recent reforms, world
agricultural markets remain highly distorted by government
policies. Traditional indicators of those price distortions
can be poor guides to the policies' economic effects.
Recent theoretical literature provides indicators of trade
and welfare-reducing effects of price and trade policies
which this paper builds on to develop more-satisfactory
indexes. The authors exploit a new Agricultural Distortion
database to generate estimates of them for developing and
high-income countries over the past half century. These
better approximations of the trade and welfare effects of
sector policies are generated without a formal model of
global markets or even price elasticity estimates.