Wednesday, April 28, 2010

Lit in review: How to do Agricultural Policy Analysis (with links)

Swinnen, "The Political Economy of Agricultural and Food Policies: Recent Contributions, New Insights, and Areas for Further Research," in the new AEPP (2010) vol. 32, No. 1, 33-58. (an earlier version ungated isn't really necessary since the new AEPP's first issue is available for free)

The last big push in agriculture and food policy analysis was in the 1980s to early 1990s when theory, new data sets, and empirical tools converged. Swinnen argues we may be heading for another happy convergence when interest in food and agricultural policy is again high and new tools are coming out that are itching to be applied. What are these new tools, you ask?

New Datasets: Database on Political Institutions, Carey's Legislative Voting and Accountability (2009), of course the Kaufmann, Kraay, and Mastruzzi governance indicators, and Anderson and Valenzuela's (2008) dataset on agricultural distortions.

New Theories:

Grossman and Helpman (1994 ungated) - Protection for Sale. Lobbyists pay to influence policy, politicians maximize a weighted function of social welfare and political contributions. Pros: has become a standard model with a number of variants that describe the world better than the original model; clear-cut micro foundations; readily applicable. Cons: Very few countries have lobbyist data; the influence of lobbyists is found to be small (ie - the weight on SWF is high); proxies for lobbying tend to be ad hoc. Ex: Gewande, Sanguinetti, Bohara (2005, ungated) for Mercosur.

Political Institutions: Institutions matter, but which institutions and how? Candidates: the degree of insulation given to policy makers; democracy vs. autocracy; proportional vs. majority-rule; bureaucratic autonomy. Ex: Pokrivcak, Crombez, and Swinnen (2006) identify how agricultural policy reforms are determined, focusing on threshold effects ("status quo bias"); Masters and McMillan (2000) and McMillan (2001 or an earlier ungated version) show that governments that expect to stay in power longer tax agricultural exports less; crises may overcome threshold effects.

Ideology and inequality: It really depends on who the farmers are. Right-wing governments protect large farmers, left-wing protect small farmers; right-wing protects agriculture more on average; left-wing protects agriculture more if there is high inequality. Ex: Olper (2001; 2007) "As far as I know, nobody has tested [the] complex interactions of institutions and redistribution as they pertain to agricultural policy."

Media: Media may improve government performance. Ex: Besley and Burgess (2002, an earlier ungated version) find "better governance and less corruption in public food provision" in India due to mass media. Media may bias views (Marks, Kalaidzandonakes, and Konduru 2006 on biotech; Verbecke and Ward 2001 and Swinnen, McCluskey, and Francken 2005 on food safety; Swinnen and Francken 2006 on globalization). Media can influence group size and collective action costs (Stromberg 2001 and 2004a; Kuzyk and McCluskey 2006; Oberholzer-Gee and Waldfogel 2005). Olper, Falkowski, and Swinnen (2009, ungated earlier draft) find lower taxation in developing countries and lower subsidies in developed countries thanks to mass media.

Areas for further research:
  • Stakeholder identification - most studies  use farmers, consumers, and taxpayers, and newly "ideology." This needs to be unpacked.
  • Interaction effects between these stories
  • Which political institutions matter? How does bureaucracy matter?
  • Political and bureaucratic entrepreneurship? (Rozelle and Swinnen 2009 discuss Mugabe and Deng Xiaoping; earlier ungated version)
  • International organizations
  • Importance of agribusiness companies - "their interests are often aligned with those of farmers, but not always."
  • Crises as discontinuities - over and under shooting of policy; non-linear effects
  • Food and agricultural policies as part of a broader reform package: in order to secure majorities, as safety nets, trade reform. This could either liberalize or increase protection to industries depending on the reason.

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