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Impacts of agricultural price support policy on price variability and welfare: Evidence from China's soybean market
Author(s) -
Wang Wenting,
Wei Longbao
Publication year - 2021
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12603
Subject(s) - economics , china , welfare , economic surplus , agriculture , partial equilibrium , computable general equilibrium , agricultural economics , general equilibrium theory , macroeconomics , market economy , ecology , political science , law , biology
China is a predominant soybean importer; thus, its domestic soybean policies have a large impact on world soybean market dynamics. We develop the first aggregate structural econometric model of China's soybean market and link it to the rest of the world (ROW), which allows us to analyze the impacts of China's soybean price support policy that ran from 2008 to 2013. We investigate the impacts of China's policy on the variability of their domestic and world soybean prices, and adopt a Monte Carlo simulation to evaluate the effects on distributional and aggregate welfare. Our results indicate: (a) after China's soybean price support policy, price transmission elasticity decreases, China's domestic price variability decreases, and world price variability increases; (b) China's producer surplus increases, consumer surplus decreases and the net welfare change in their domestic market is negative; and (c) although soybean exporting countries in the ROW experience significant welfare gains, the world net welfare change is negative.