Raboy, David G. and Basher, Syed Abul and Hossain, Ishrat and Kaitibie, Simeon (2012): More efficient production subsidies for emerging agriculture in micro Arab states: a conceptual model.
Download (358kB) | Preview
Import-dependent arid Arab micro states such as those in the Persian Gulf are particularly vulnerable to food-security risk. Among the many remedial policy suggestions is some initiation or increase in domestic production to insulate these countries from supply disruption, import price volatility and high import prices. This paper does not address the efficacy of domestic production but notes that such production will require government intervention in the form of production subsidies to mitigate market risk. The narrow focus of this paper is to provide a conceptual model of subsidies that avoids many previous problems in established subsidy systems. The paper describes a subsidy model that makes the most use of market signals, avoids perverse incentives, and provides a structure to encourage efficiency, quality enhancement and product differentiation in agricultural products. The system is designed to be WTO compliant. The model has two components: a calculation of the true economic cost of a unit of an agricultural product and a deficit payment that is calculated to bridge the gap between true economic cost and market remuneration. The structure of the deficit payment is crucial to the establishment of a beneficial incentive system. The paper provides a mathematical rendering of the model, analysis of the associated incentive structure and a numerical example for a hypothetical Arab micro state.
|Item Type:||MPRA Paper|
|Original Title:||More efficient production subsidies for emerging agriculture in micro Arab states: a conceptual model|
|Keywords:||Production subsidies; Arab micro states; Cost of capital; Economic efficiency|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation
N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N55 - Asia including Middle East
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity
|Depositing User:||Syed Basher|
|Date Deposited:||17. May 2012 11:43|
|Last Modified:||12. Feb 2013 21:43|
Agricultural & Applied Economics Association (AAEA), 2000. Commodity Costs and Returns Estimation Handbook, Ames, Iowa.
Al-Nasser, a., 2006. Regional Report: Poultry industry in Kuwait. World's Poultry Science Journal, 62, 702-708.
Al Mutairi, M. E., Tian, G., Tan, A., 2009. Corporate finance practice in Kuwait: a survey to confront theory with practice. Paper presented to the 22nd Australasian Finance and Banking Conference 2009. Available at http://ssrn.com/abstract=1456750.
Benjelloun, H., 2009. Portfolio diversification: evidence from Qatar and the UAE. Int. J.Econ. Iss., 2, 9-15.
Benjelloun, H., Squalli, J., 2008. Do general indexes mask sectoral inefficiencies? A multiple variance ratio assessment of Middle Eastern equity markets. Int. J. Man. Fin., 4, 136-151.
Bjornson, B., Innes, R., 1992. Another look at returns to agriculture and nonagricultural assets, Am. J. Agric. Econ., 74, 109-119.
De Pauw, E., 2010. Land survey for suitability and availability for food and feed production in Qatar. The Agricultural Sector in Qatar: Challenges and Opportunities, International Center for Agricultural Research in Dry Areas (ICARDA), Aleppo, Syria.
Erickson, K.W., Mishra, A.M., Moss, C.B., 2001. Rates of return in the farm and non-farm sectors: a time series comparison. Paper presented to the 2001 Annual Meeting of Western Agricultural Economics Association, July 8-11, Utah.
Food and Agricultural Organization (FAO) 2010. Country profile: food security indicators—Kuwait. FAO Rome.
Fullerton, D., 1987. The indexation of interest, depreciation and tax reform in the United States. J. Pub. Econ., 32, 25-51.
Hall, R., Jorgenson, D., 1967. Tax policy and investment behavior. Am. Econ. Rev., 57, 391-414.
Hopkins, J.W., Morehart M., 2002. An empirical analysis of the farm problem: comparability in rates of return, in Luther Tweeten and Stanley R. Thompson-eds. Agricultural Policy for 21st Century Iowa State Press, Iowa, 70-90.
Huber, P.J., 1964. Robust estimation of a location parameter, Annals of Mathematical Statistics, 35, 73–101.
Hulten, C.R., Wykoff, F.C., 1981. The measurement of economic depreciation, in C.R. Hulten-ed., Depreciation, Inflation, and the Taxation of Income from Capital, Urban Institute Press, Washington DC, 81-125.
IMF, 2009. Global Financial Stability Report, International Monetary Fund, October, Washington DC.
Jorgenson, D., 1963. Capital theory and investment behavior, Am. Econ. Rev., 53, 247-259.
Klein, B., Leffler, K., 1981. The role of market forces in assuring contractual performance, J. Pol. Econ., 89, 615-641.
Lagerkvist, C., 1999. The user cost of capital in Danish and Swedish agriculture, Eur. Rev. Ag. Econ., 26, 79-100.
Landes, W.M., Posner, R.A., 1987. Trademark law: an economic perspective, J. Law Econ., 30, 265-309.
Lewis, P.E.T., Hall, N.H., Savage, C.R., Kingston, A.G., 1988. Taxation, cost of capital and investment in Australian agriculture, Aust. J. Agric. Econ., 32, 15-21.
Lintner, J., 1964. The valuation of risky assets and the selection of risky investments in stock portfolios and capital budgets, Rev. Econ. Stat., 47, 13-37.
Mazid, A. Aw-Hassan, A., 2010. Report on cost production costs in Qatar, The Agricultural Sector in Qatar: Challenges and Opportunities, International Center for Agricultural Research in Dry Areas (ICARDA), Aleppo, Syria, 413-424.
Narrod, C., Roy, D., Okello, J., Avendãno, B., Rich, K., Thorat, A., 2009. Public-private partnerships and collective action in high value fruit and vegetable supply chains, Food Policy, 34, 8-15.
Qatar National Food Security Programme (QNFSP) 2012. http://www.qnfsp.gov.qa/
Qatar Statistics Authority (2009): Monthly HS 8-digit data for 2004-2006 provided electronically.
Raboy, D.G., Simpson, T., 1992. A methodology for tariffication of commodity trade in the presence of quality differences—the case of peanuts, World Econ., 15, 271-281.
Raboy, D.G., Wiggins S.N., 1997. Intangible capital, hedonic pricing and international transfer prices, Pub. Fin. Rev., 25, 347-365.
Rich, K.M., Narrod, C.A., 2010. The role of public-private partnerships in promoting smallholder access to livestock markets in developing countries, Discussion Paper 01001, International Food Policy Research Institute, Washington DC.
Rosenbaum, R.E., Wilson W.W., 1991. Quality differentials and prices: are cherries lemons?, J. Ind. Econ., 34, 649-658.
Rousseeuw, P.J., 1984. Least median of squares regression, J. Am. Stat. Assoc., 79, 871–880.
Sharpe, W.F., 1964. Capital asset prices: a theory of market equilibrium under conditions of risk, J. Fin., 19, 425-442.
Streeten, P., 1993. The special problems of small countries, World Dev., 21, 197-202.
Turvey, C.G., Driver, H.C., 1987. Systematic and nonsystematic risks in agriculture,” Can. J. Agric. Econ., 35, 387-401.
United Arab Emirates (UAE), Ministry of Economy, 2006. Statistical Abstract, Accessed in February 2010. http://www.economy.ae/English/EconomicAndStatisticReports/StatisticReports/StatisticAbstract/Pages/sa2006.aspx .
United Arab Emirates (UAE), National Bureau of Statistics. Accessed in May 2012. http://www.uaestatistics.gov.ae USDA-Economic Research Service, 2009: “Commodity Costs and Returns,” at http://www.ers.usda.gov/Data/CostsAndReturns/, Washington DC.
USDA-Foreign Agricultural Service (USDA-FAS) 2006. Kuwait poultry products annual poultry meat report 2006. GAIN Report KU6002. United States Department of Agriculture, Washington DC,
Verardi, V., Croux C., 2009. Robust regression in stata, Stata J., 9, 439-453.
Wiggins, S., Raboy, D.G., 1996. Price premia to name brands: an empirical analysis, J. Ind. Econ., 44, 377-388. Williamson, O., 1975. Markets and Hierarchies, Free Press, New York, NY.
World Bank 2009. Improving Food Security in Arab Countries. World Bank. Washington DC.
World Trade Organization, 1995. Agreement on Agriculture, Geneva, CH.
World Trade Organization, Committee on Agriculture, 2008. Revised Draft Modalities for Agriculture, TN/AG/W/4/Rev. 4, December, Geneva, CH.