Journal article

Authors list: Thompson, SR; Schmitz, PM; Iwai, N; Goodwin, BK

Publication year: 2004

Pages: 1851-1858

Journal: Applied Economics

Volume number: 36

Issue number: 16

ISSN: 0003-6846

eISSN: 1466-4283

DOI Link: https://doi.org/10.1080/0003684042000279744

Publisher: Taylor and Francis Group

Abstract: 
Agricultural price policies in developed countries aim at protecting farmers against both low and volatile world market prices. However, traditional indicators of protection only refer to the income (level) effect of policy. Following other research, it is argued that public policy can also yield an insurance (stabilizing) effect. In this paper a way to measure these dual effects is proposed. The method is illustrated with wheat market data for the USA and the European Union. Strong evidence is found that the insurance effect is an important component of protection, albeit a small one relative to the income effect. Policy support provided higher income and lower insurance effects in the EU than in the USA. For both markets, policy reforms in the 1990s led to significantly reduced income effects and smaller insurance effects. Without accounting for the influence of policy on income variability, traditional measures of protection will understate the real rate of protection.

Harvard Citation style: Thompson, S., Schmitz, P., Iwai, N. and Goodwin, B. (2004) The real rate of protection: the income and insurance effects of agricultural policy, Applied Economics, 36(16), pp. 1851-1858. https://doi.org/10.1080/0003684042000279744

APA Citation style: Thompson, S., Schmitz, P., Iwai, N., & Goodwin, B. (2004). The real rate of protection: the income and insurance effects of agricultural policy. Applied Economics. 36(16), 1851-1858. https://doi.org/10.1080/0003684042000279744