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									Consequences of a food
security strategy for
welfare, income distribution
and land degradation:
the Philippine case
    Ian Coxhead
    University of Wisconsin-Madison
Overview
   Food policy and trade policy
   Models of trade policy and the
    environment
   The APEX model of the Philippine
    economy
   Policy and technical change
    simulations
   Environmental and welfare
    consequences
Food policy and trade
policy
   Under GATT/WTO, higher relative
    protection for ag. in some LDCs
   Philippines: state grain trade
    monopoly (NFA) until mid-’90s
     Targets:grain self-sufficiency and
      defense of price bands
     Instruments: international trade
      QRs and domestic marketing
   Rising NPR for corn from 1970s
Trade policy and the
environment
   Trade policy measures alter net
    ag. land demand and its allocation
    to crops
   Indirect environmental impact
    when land degradation rates are
    crop-specific
   Endog. price responses to a shock
    condition land demand outcomes
   Food policy may dampen price
    responses
Partial equilibrium effects
of a price support scheme


              S        S’


 p*                   D*

                  D
        q q’ q*
Land degradation and
economic welfare in
general equilibrium
   “Effective” land endowment for 2
    crops: T  (1  a c )Ac Tc* (1 a d )Ad Td*
   Derived demand for land:
                      cj g j (p, v) c j
             Tj  y j    
                      r     p j r(p,v)
   Aggregate budget constraint:
                                           c j
              e(p,u)  g(p,v)   j a j yj
                                           r
    “Weak disposal” assumes a = 0, so
    environmental damages not counted.
Welfare with food policy
and land degradation
   Comp. statics of a price increase:
       u                           * y j      Tj* rj 
    eu      (ed  yd )   a j  j
                                    T         yj          
       pd                j  C, D    pd        r  pd 

   Net government grain purchases
                  D  gd ( p,v)  ed (p,u)
                    G



   Welfare with food policy and land
    degradation:              c j
    e(p,u)  g( p,v)  pd D   j a j yj
                                G

                                              r(p,v)
   Closures: fix pd and solve DG, or
    vice versa
The APEX model of the
Philippines economy
   Designed for ag.policy experiments
   Highly disaggregated by sector,
    subsector and region
   Uses econometrically estimated
    response parameters
   Extended to include crop-specific
    land degradation rates for upland
    crops
APEX agricultural sector
structure
APEX closures
   “Unrestricted”: grain import tariffs,
    but no QRs and no domestic
    market interventions
   “NFA”: QRs fix grain trade at base
    levels, and NFA buys/sells grain to
    fix nominal consumer price
   Other features: balanced trade and
    gov’t budget (adjustment through
    changes in h’hold expenditures)
APEX experiments
   Expt. 1: Increase in farm gate
    support price (NFA closure)

   Expt. 2: Technical progress in corn
    production (unrestricted closure)

   Expt. 3: Technical progress in corn
    production (NFA closure)
Changes in agricultural output
Changes in producer prices
Changes in aggregate sectoral
output
Changes in measures of
aggregate welfare
Changes in real household
expenditures
Changes in land degradation
by region
Conclusions
   Food security is a desirable goal,
    but self-sufficiency and price-fixing
    policies may have welfare and
    environmental ‘surprises’
   Investments in technical progress
    have high social rates of return
    when env. benefits are included;
    Philippine food policies diminish
    these
Conclusions
   QRs and domestic price-fixing
    have little effect on producer prices
    or income distribution, are costly in
    welfare terms, and may promote
    ag. land degradation
   Design of food, trade and
    environmental policies should be
    integrated to minimize unwanted
    ‘surprises’
          For further information...
   APEX model and simulation results in full:
    www.aae.wisc.edu/coxhead/apex/apex.htm

             Questions & comments to:
              coxhead@facstaff.wisc.edu

								
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