Agricultural Policy and Productivity: International Evidence

Fan Hu and John M. Antle

Review of Agricultural Economics, 1993, vol. 15, issue 3, 495-505

Abstract: The aggregate agricultural production function is estimated jointly with a political model that explains differences in policy across countries and over time to test the hypothesis that agricultural policy has had a significant impact on aggregate agricultural productivity. The econometric results strongly support this hypothesis. However, this productivity effect is found to be large and statistically significant only for those countries that tax or subsidize agriculture moderately. In countries that tax or subsidize agriculture at a high rate, the impact of marginally-reducing the tax or subsidy rate is not found to be significant, presumably because high levels of taxation or subsidization distort farmers' incentives to such a degree that marginal changes in policy do not measurably affect their behavior.

Date: 1993
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