Consistency in industry assistance policy evaluation : a case study of the Bureau of Agricultural Economics

Abstract

The main concern of thin study in consistency in industry assistance policy evaluation. A survey of the literature suggests two alternatives for defining consistency but the one adopted in this study is the absence of incompatible propositions. While attention is focussed on consistency in the policy evaluation arguments contained in BAE submissions to the IAC and related reports over the period 1974-83, the issues raised in the study are judged to be of wider applicability. In particular, it is argued that the degree of consistency in policy evaluation has implications for both equity in the 'rules of the game' governing the provision of industry assistance and the level of uncertainty in assistance and related producer and consumer markets. Inspection of the 1iterature sugqests that any increase in the level of uncertainty due to variations in the principles adopted for policy evaluation could affect the behaviour of the household and the firm. Because the BAE has been identified as a major participant in rural industry inquiries conducted by the TAC it is important to scrutinise the policy evaluation criteria considered and applied in its submissions and related reports. To this end a review of the economic arguments perceived by the Bureau to be relevant to assessments of industry assistance in presented in Part 2 of the study. It deals with short-term assistance, longer term assistance for rural outputs and assistance for the use of inputs and structural adjustment. From the review of Part 2, a list of economic arguments relevant to rural industry assistance is compiled in Part 3. The list covers a range of topics including criteria for short term industry assistance, tariff compensation, resource mobility, price instability, market imperfections, structural adjustment and welfare assistance. The Bureau's use of industry assistance arguments is examined from two perspectives. First, an attempt is made to identify those occasions where the economic' circumstances of industries under inquiry are similar. This information .is then employed for the purpose of locating those submissions where it may have been appropriate to raise particular economic arguments, given their consideration in other submissions under similar economic circumstances. Second, the Bureau's application of industry assistance arguments are discussed with a view to identifying any differences in attitude towards their validity. The main results of the analysis are that the Bureau may have contributed to the level of uncertainty surrounding the eligibility conditions for rural industry assistance and may not have always employed a consistent policy evaluation framework in its rural industry submissions to the IAC and related reports. However, it is necessary to exercise caution in the use of these results as they are derived from a study which focusses attention on the Bureau's negative contribution to consistency. Also, it is not appropriate to use the results as a measure of the Bureau's contribution to rural industry assistance policy evaluation. Nevertheless, the inconsistencies discussed in this study do emphasise the substantial benefits that may be associated with careful co-ordination and regular stock-taking of the grounds for industry assistance. Show more