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Optimal agricultural policy and PSE measurement: an assessment and application to Norway

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  • Blandford, David
  • Brunstad, Rolf Jens
  • Gaasland, Ivar
  • Vardal, Erling

Abstract

The producer support estimate (the successor to the producer support equivalent) calculated by the OECD is widely used as an indicator of distortions created by agricultural policies. In this paper we demonstrate that changes in the relative (percentage) PSE are not an accurate indicator of the implications of policy reform for domestic welfare or for trade distortions. We demonstrate that it is important to consider the implications of changes in both the level and the form of support in evaluating the impact of policy reform. Using a model of Norwegian agriculture we show that reforms indicated towards the provision of public goods, while apparently leading to an increase in relative support, are actually superior to existing agricultural policies or to a policy aimed at eliminating subsidized exports both in terms of reducing trade distortions and increasing domestic economic welfare.

Suggested Citation

  • Blandford, David & Brunstad, Rolf Jens & Gaasland, Ivar & Vardal, Erling, 2008. "Optimal agricultural policy and PSE measurement: an assessment and application to Norway," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36769, Agricultural Economics Society.
    • Handle: RePEc:ags:aes008:36769
    DOI: 10.22004/ag.econ.36769
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    References listed on IDEAS

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    1. Chang, Hung-Hao & Boisvert, Richard N. & Blandford, David, 2005. "Achieving Environmental Objectives Under Reduced Domestic Agricultural Support and Trade Liberalization: An Empirical Application to Taiwan," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 34(1), pages 1-16, April.
    2. Rolf Jens Brunstad & Ivar Gaasland & Erling Vardal, 2005. "Multifunctionality of agriculture: an inquiry into the complementarity between landscape preservation and food security," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 32(4), pages 469-488, December.
    3. Jeffrey M. Peterson & Richard N. Boisvert & Harry de Gorter, 2002. "Environmental policies for a multifunctional agricultural sector in open economies," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(4), pages 423-443, December.
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    Cited by:

    1. Czyżewski, Bazyli, 2016. "Political Rents of European Farmers in the Sustainable Development Paradigm. International, national and regional perspective," MPRA Paper 74253, University Library of Munich, Germany.
    2. Czyżewski, Andrzej & Grochowska, Reanata & Józwiak, Wojciech & Kosior, Katarzyna & Kułyk, Piotr & Mirkowska, Zofia, 2014. "Development trends in agricultural sector and policies − challenges for the future (Synthesis)," Multiannual Program Reports 206066, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).

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    More about this item

    Keywords

    Agricultural and Food Policy;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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