Optimal Food Price Stabilization in a Small Open Developing Country

Christophe Gouel and Sebastien Jean

Working Papers from CEPII research center

Abstract: This paper analyzes food price stabilization policies in a small, open, developing country. Without public intervention, price dynamics are driven by domestic productive shocks and international prices. Trade and/or storage policies are optimally designed to increase welfare, in a context where consumers are risk-averse and markets are incomplete. An optimal storage policy on its own is detrimental to consumers, since its stabilizing benefits leak into the world market. In contrast, optimal combination of storage and trade policies results in a powerful stabilization of domestic food prices. Such a policy mix includes export restrictions, which are harmful to export partners, but to refrain from using them is costly and entails substantial transfers from consumers to producers.

Keywords: Food security; incomplete markets; storage; trade policy; export restrictions (search for similar items in EconPapers)
JEL-codes: D52 F13 Q11 Q17 Q18 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (26)

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Related works:
Journal Article: Optimal Food Price Stabilization in a Small Open Developing Country (2015)
Working Paper: Optimal food price stabilization in a small open developing country (2015)
Working Paper: Optimal food price stabilization in a small open developing country (2012)
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