The methodologies of the studies - Institutional Constraints to Small Farmer Development in Southern Africa - page 313

Table A4.3. Identities for calculating price effects of policy distortion (Monke and Pearson, 1989).

Tradables Domestic resources Profits

Output Input

Private A B C D=(A-B-C)

Social E F G H=(E-F-G)

Policy transfer I=(A-E) J=(B-F) K=(C-G) L=(I-J-K)=(D-H)

A.4.2.1 Welfare analysis

For this study, the static welfare effects related to Swaziland's maize market sector will be
estimated using the traditional Partial Equilibrium model, as adopted from Tsakok (1990).
The Partial Equilibrium model enables the estimation of the effects of price changes on the
current market arrangement, ceteris paribus, and further looks at the economic welfare
effects of the changes in price on the different economic groups. Here the welfare effects
will be defined in terms of the amount of money that producers earn, consumers lose,
government receives as revenue and the whole of society loses due to the rise in prices that
reduces the demand for the commodity (deadweight losses).

The analytical formulation is presented by the equations below. A number of variables that
form an integral part of this analysis are presented in the table and include the domestic
maize grain price (P d ) being the price that large millers and other buyers pay the NMC for
the maize that they require for milling, these prices were obtained from the NMC. The
border price (P b ) is the import parity price for maize grain imported into Swaziland, i.e.
the landing price for maize imports. These prices were also obtained from NMC offices.
The Nominal Protection Coefficient (NPC) is the ratio of P d to P b (P d / P b ). This is a
measure of protection received by either producers or consumers. An NPC value of greater
than 1 (NPC>1) means that producers receive positive protection i.e. they received a
higher price than they would have without the intervention. On the other hand, While
an NPC<1 represents negative protection for producers suggesting that consumers receive
the protection while producers are discriminated against by the policy intervention.
The variable 't' is the implicit tariff (NPC-1), suggesting the level of efficiency losses to
consumers as a result of domestic and border prices difference. The variable (V') is the value
of domestic production at current domestic price, a product of P d and domestic production,
while W' is the value of domestic consumption at domestic prices and is the product of total
supply and P d . The last essential variable in these equations is the elasticities of supply and
demand for maize in Swaziland, denoted as e s and n d respectively.