A policy preference analysis of the Tunisian wheat sector Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/1v53k013p

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  • Governments in less developed countries have recognized in recent years the need to liberalize economic policies in order to increase efficiency in agricultural commodity markets. In an attempt to help decision makers assess alternative choices, most policy studies, however, have focused on the efficiency norm criterion without much consideration for social preferences. A result is that some policies identified as desirable are politically infeasible. The objective of the present study is to develop and apply a model explaining government behavior in setting agricultural price policies. It is assumed that government maximizes a policy preference function whose arguments are the welfares of interest groups affected by government policies. An interest group's well-being is represented by its utility rather than by the more commonly used, but theoretically deficient, consumer/producer surplus or money metric measures. The model is applied to the Tunisian wheat sector. The econometric revealed preference approach is used to estimate a Tunisian wheat policy preference function (PPF) and to derive social weights reflecting the distributional goals of the policy-making process. The bootstrap technique is employed to assess statistical reliability of these weights and to permit hypothesis testing. Empirical results confirm and quantify a strong consumer bias in Tunisian price policy. The Tunisian government is willing to transfer one util's worth of its budget to increase consumer welfare by 0.076 util, whereas it will make the same one util's worth of budget transfer only if it generates a 5.2 util increase in producer welfare. Analysis based on the policy framework proposed here shows that, because efficient policy reforms are inconsistent with decision makers' preferences, they are likely to rejected in favor of the current policies. Successful policy reform therefore should be accompanied by institutional reforms that alter relative bargaining powers in the policy process and hence change the PPF weights.
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