Understanding Government Interventions in Agricultural Markets

Abstract

Find out the cause of this effect,

Or rather say, the cause of this defect,

For this effect defective comes by cause.

– Polonius, in Shakespeare's Hamlet (Act II, Scene 2) Most of the world's poor still live in rural areas, a situation that is forecast to prevail for many decades to come if we continue with “business as usual.” The absolute number of rural poor people living on $1 a day fell between 1993 and 2002 by an estimated 150 million, to 890 million globally, but if China is excluded, there has been virtually no net decline over that period (Chen and Ravallion 2008, Ravallion, Chen and Sangraula 2007). As well, many urban poor are recent emigrants who, perceiving bleak prospects in agriculture, moved to the city in search of a higher income. Thus higher rewards to farming in developing countries could help reduce both urban and rural poverty, a view that is confirmed by a recent set of simulation studies (Anderson, Cockburn and Martin 2010).

In the past, earnings of farmers and agribusinesses in developing countries often have been depressed by prourban and antiagricultural biases in own-country policies. While progress has been made over the past two or three decades by numerous countries in reducing those and associated antitrade policy biases, many price distortions remain intersectorally as well as within the agricultural sector of low- and middle-income countries.