Food Price and Trade Policy Biases - The Oxford Topic of Food, Politics, and Society - page 370

tax (see also Anderson, Martin, and Valenzuela 2006). That is, domestic subsidies to or
taxes on agricultural outputs and inputs make only minor contributions. In particular,
subsidies to farm inputs and support for public agricultural research have added little to
overall farmer assistance in high-income countries, and they have done relatively very
little in the past to offset the effective taxation of agriculture in developing countries,
with the important exception of India (Anderson 2009, Ch. 10). Public agricultural
research investments in 2000-2004, for example, amounted to less than 2 percent of
the gross value of agricultural output at undistorted prices in high-income countries,
and to only 1 percent in developing countries (Anderson 2009, Table 1.11), with similar
percentages in earlier decades. That is very minor compared with the percentage NRAs
delivered through national governments' product price distortions.
Impacts of Distortions on Economic
Welfare, Inequality, and Poverty
Using the above estimates of price distortions, recent estimates have been made of the
impacts of past reforms and remaining policies on their global welfare cost, and of the
impact of the current distortion pattern on income inequality and poverty. Consider
first the aggregate economic welfare effects.
National and Global Economic Welfare Effects of
Price-Distorting Policies
Valenzuela, van der Mensbrugghe, and Anderson (2009) provide a combined retro-
spective and prospective assessment of how far the world has come, and how far it still
has to go, in rectifying the disarray in world agriculture. That is, their economy-wide
modeling exercise seeks to quantify the impacts of both past reforms and current poli-
cies. It does so by comparing the effects of the recent World Bank project's distortion
estimates for the period 1980-1984 with those of 2004, making use of the World Bank's
global Linkage model (van der Mensbrugghe 2005) to estimate the effects on individual
countries as well as on country groups and the world as a whole.
Several key findings from that modeling study are worth emphasizing. First, the
policy reforms from the early 1980s to the mid-2000s are estimated to have improved
global economic welfare by $233 billion per year, and removing the distortions remain-
ing as of 2004 would add another $168 billion per year. This suggests that, in a global
welfare sense, the world moved three-fifths of the way toward global free trade in goods
over that quarter century.
Second, developing countries benefited proportionately more than high-income
economies (1.0 percent compared with 0.7 percent of national income) from those