The cost of protection to grain farmers during the interwar years

"Existing literature on the causes of agricultural protection unsatisfactorily explains why protection to grain farmers substantially increased during the Great Depression. Following the Gardner ́s (1987) idea that governments tend to assist commodities with low supply or demand elasticity, this paper calculates the welfare costs of protection to wheat during the 1920s and the Great Depression. Estimations based on a single- market, single-product model point out that the costs of protection maintained relatively low in France during the 1930s (less than 0.2 per cent of the GDP), but sharply increased in Spain and, especially, in Germany and Italy. In Germany, protection to wheat farmers caused a loss of 2-3 per cent of GDP and 1.3 and 1.7 per cent in Italy, while this figures reached to 0.1-1 per cent in Spain. Although further research has to be done on the indirect effects of these policies, these estimations suggest that governments protected farmers during the 1930s despite the high costs of this policy."