 Trading-off volatility and distortions? Food policy during price spikesHannah Pieters and Johan Swinnen Food Policy, 2016, vol. 61, issue C, 27-39 Abstract: This paper analyses the trade-off between price distortions and reduced volatility when governments intervened in agricultural and food markets during the recent food price spikes. We develop a model to derive how much distortions a government would introduce when it cares about price stability in a situation with limited policy options. We show that there is a trade-off and identify the optimal combination of distortions and stability for given international price shocks and interest groups preferences for stability. We compare these theoretical findings with empirical indicators on actual government interventions in staple food markets. We find that several countries have been able to reduce (short run) price volatility in the domestic markets while at the same time allowing structural (medium and long term) price changes to pass through to producers and consumers. However, this is not the general case. For many countries, even when explicitly taking into account the trade-off (and the benefits of reducing volatility) government policies appear far removed from the optimal trade-off and there appears to be much room for policy improvement. Keywords: Food policy; Food price spikes; Price volatility; Price distortions; Risk aversion; Theory; Empirics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfpoli:v:61:y:2016:i:c:p:27-39 DOI: 10.1016/j.foodpol.2016.01.004 Access Statistics for this article Food Policy is currently edited by J. Kydd More articles in Food Policy from Elsevier |
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