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Evaluating Alternative Policy Responses to Higher World Food Prices: The Case of Increasing Rice Prices in Madagascar
Author(s) -
Coady David,
Dorosh Paul,
Minten Bart
Publication year - 2009
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2009.01266.x
Subject(s) - economics , poverty , welfare , tariff , developing country , revenue , partial equilibrium , distribution (mathematics) , food prices , international economics , income distribution , public economics , agriculture , general equilibrium theory , food security , microeconomics , inequality , economic growth , market economy , mathematical analysis , ecology , mathematics , accounting , biology
Higher world food prices have led many developing countries to adopt policies to mitigate the impact on low‐income households. This article sets out a partial equilibrium framework to evaluate the efficiency, distributional, and revenue implications of alternative policy responses. The model is applied to evaluate tariff reductions and targeted transfers in Madagascar. Although lowering tariffs generates substantial efficiency gains, these accrue mainly to the top half of the welfare distribution, and poor net sellers are actually worse off. Developing a system of targeted direct transfers to poor households is likely to be a substantially more cost‐effective approach to poverty alleviation.