Abstract:
Searching for suitable measures to solve internal economic problems and
promote economic development, many third world countries have switched from
competitive to government-controlled trade of their agricultural staples. Such
government intervention has failed in many LDCs and researchers have
formulated models and made suggestions to alleviate the resulting distortions.
Modelling of agricultural price policy mostly has utilized price information only,
without considering stocks as a variable that influences prices.
This thesis develops a model in which both price and stock levels are state
controlled policy variables. It is assumed that the policy makers set price and
stock levels so as to optimize the expectation of a socially weighted sum of
incomes to producers, consumers, and government. An empirical application of
the model is employed to estimate the social welfare weights which government
implicitly has used during the past several decades.
The policy model is formulated in such a way that it enables us to assess
the rapid shifts that occurred in policy variables between the pre-reform (1961-79)
and post-reform (1980-86) period. Empirical results suggest that domestic coffee
demand and supply are price responsive. Short-run own price demand and supply
elasticities, -0.129 and 0.119 respectively, are consistent with findings of previous
studies. The estimated policy model implies that, before reform, consumer
incomes were weighted more highly than producer or government incomes when
Redacted for Privacy
policy makers formulated coffee pricing and export policy. After reform,
government incomes were valued more highly than either consumer or producer
incomes. State policy makers therefore have lately shaped price and stock policy
with special regard to its effects on government revenues.
