Metrics for Agricultural Transformation: Update on Recent and Ongoing Developments April 19, 2013 Washington, DC

1. Policy-related Distortions to
Agricultural Incentives
Why do we care?
How do we measure them?
How do we use the measures?

2. Why do we care?
 Traditional static inefficiencies –
‘’Harberger Triangles’’
– Tend not to be very impressive
 Incentives for poor governance (corruption)
 Dynamic inefficiencies – poor investment
choices
– Public as well as private

3. Some research quantifies these
dynamic effects

4. One std. deviation in ag incentive distortion index
reduces overall growth rate by 0.6 percentage pts

5. How do we measure
distortions?
A few examples

6. Large World Bank
research project 2010
Updating of the Krueger, Schiff,
Valdes study in 1980s
Many countries, developing and
developed
Calculated many indicators of policy,
including traditional trade indicators
(NRP, ERP)
Major findings of large net taxation of
agriculture in developing countries,
mainly through indirect measures –
exchange rate distortions and
protection of manufacturing

7. Anderson also calculated many
indicators, but two main ones
were…
 Nominal rate of assistance NRA – how much
government policy caused the nominal returns
to agriculture to diverge from their levels
without policy measures
 Relative rate of assistance – how much
government policy caused the returns to
agriculture to diverge from their levels without
policy measures, relative to returns to non-
agriculture

8. One finding – trend towards
neutrality, looking at NRAs …

9. Or RRAs

10. Like K-S-V study, positive support to
imports, negative protection for exports,
but both becoming more positive over
time

11. Evolution of RRAs by Developing
Region
From LAC in the Global Agricultural Market: Harnessing Trade to
Feed the World and Promote Rural Development
-60
-50
-40
-30
-20
-10
0
10
1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
LAC
Africa
Asia

13. OECD standard indicators
 NAC Nominal Assistance Coefficient: ratio of farm receipts with and without support
 NPC Nominal Protection Coefficient: the ratio of producer prices to world prices
measured at country’s border
 PSE Producer Support Estimate (%): The monetary value of policy transfers expressed
as a percentage of gross farm receipts
 MPS Market Price Support: Part of PSE provided through measures that affect the
price received by farmers (trade measures, budget support linked to production)
 SCT Single Commodity Transfers: part of PSE attributable to support to identifiable
individual commodities
 CSE Consumer Support Estimate : Measures (trade and budget) that affect
consumer spending on ag products
 GSSE General Services Support Estimate: Public expenditures on services that benefit
many ag producers
 TSE Total Support Estimate: sum of PSE, budgetary transfers component of the CSE
and the General Services Support Estimate. TSE enumerates support provided to
producers individually and collectively, as well as subsidies to consumers

15. Trends in support
Overall decline in
support, especially
based on production

16. From Agricultural Public
Expenditure Review, Nicaragua
PSE in Nicaragua is higher than OECD
average

17. From Agricultural Public
Expenditure Review, Nicaragua
Support focused on a few commodities

18. From Agricultural Public
Expenditure Review, Nicaragua
High Producer Support Creates Large Negative Consumer
Subsidy Estimate, Reducing Food Security of Poor
Consumers

19. MAFAP: Monitoring African Food
and Agricultural Policies
 Joint project FAO, IFPRI, NEPAD, GATES
Foundation, World Bank, USAID, website
housed with FAO
 Using many of the policy indicators
mentioned in this presentation
 Practical applications in country reports,
policy briefs; database in 2013