An Evaluation of the Disincentive Effect Caused by P. L. 480 Shipments

Gary L. Seevers

American Journal of Agricultural Economics, 1968, vol. 50, issue 3, 630-642

Abstract: Changes in foodgrain prices and domestic output caused by changing the quantity of U. S. Public Law 480 shipments to a hypothetical country show that both prices and output are highly sensitive to elasticities of supply and demand. But for many cases examined, changes in these shipments had relatively insignificant price—output effects and these could have been offset by a modest growth in population. Estimates of parameters for India indicate that a 20-percent increase in the quantity of foodgrain shipments between 1956–57 and 1961–62, other things being equal, would have decreased foodgrain prices 1.6 percent and domestic foodgrain output 0.4 percent. These disincentives may be outweighed by the effects on consumption, income distribution, and resource allocation, suggesting that, overall, the effects of P. L. 480 shipments are beneficial.

Date: 1968
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