The Impact of a New WTO Agricultural Agreement ... - Tufts University

More documents

Recommendations

Info

27 To measure the net welfare change, we combine the change in producer surplus with the change in consumer surplus. 7 Producer surplus is difference between the cost of producing a unit of a good, and the price at which that unit is sold. With any quantity of the good, the producer surplus is the sum of the differences between the marginal cost and the price of each unit. Thus, producer surplus increases with each additional unit, up to the point where the marginal cost equals the price. Similarly, consumer surplus is the difference between the price of a unit of a good, and the maximum amount that the consumer would have been willing to spend on that unit. With quantity, consumer surplus is the sum of the differences between the marginal value of each unit and the price of that unit, so consumer surplus increases with quantity until the point where the marginal value equals the price of the good. In Figures 1-3, the initial producer surplus is the area between S T and W. 8 The initial consumer surplus is the area between D and W. When the price increases from W to W*, the producer surplus increases while the consumer surplus shrinks. Figures 4-6 illustrate the changes in consumer and producer surplus that occur when the price increases to W*. In Figure 4, the net-importing country, we see that the negative change in consumer surplus overlaps and exceeds the positive change in producer surplus. The net change is the area abcd, which is the amount by which the change in consumer surplus is greater than the change in producer surplus. Thus, the net-importing country experiences a net welfare loss upon the price increase. In contrast, Figure 5 demonstrates that the net change in welfare is positive in the net-exporting country. The change in producer surplus overlaps and exceeds the change in consumer surplus. 7 This analysis treats producers and consumers as two distinct groups, although in actuality most farmers buy some food and most net-food-buyers grow some cereals. Section 4 discusses the overlap of producers and consumers. 8 Note that S T , the trader’s marginal cost curve, also includes farmers’ marginal costs, as the traders purchase the grain from farmers.
28 P KEY: W* W d a c b D S T S F D: Domestic consumers’ demand S F : Farmers’ marginal cost of production S T : Traders’ marginal cost W: Initial world price (before subsidies removed) W*: World price after removal of subsidies P: Initial quantity produced domestically C: Initial quantity consumed domestically P*: Quantity produced after change C*: Quantity consumed after change = Change in Producer Surplus (positive) P P* C* C Q = Change in Consumer Surplus (negative) Figure 4. Change in CS and PS when price increases in a net-importing country. P W* W a d c b S T S F KEY: D: Domestic consumers’ demand S F : Farmers’ marginal cost of production S T : Traders’ marginal cost W: Initial world price (before subsidies removed) W*: World price after removal of subsidies P: Initial quantity produced domestically C: Initial quantity consumed domestically P*: Quantity produced after change C*: Quantity consumed after change D C* C P P* Q = Change in Producer Surplus (positive) = Change in Consumer Surplus (negative) Figure 5. Changes in CS and PS when price increases in a net-exporting country.
Page 1 and 2: The Impact of a New WTO Agricultura
Page 3 and 4: The Impact of a New WTO Agricultura
Page 5 and 6: 2 INTRODUCTION “The rural poor, g
Page 7 and 8: 4 in agriculture, the welfare of fa
Page 9 and 10: 6 1. Background on the WTO and Dome
Page 11 and 12: 8 Of the three types of domestic su
Page 13 and 14: 10 for differences between internat
Page 15 and 16: 12 the G-20 suggests stricter adjus
Page 17 and 18: 14 Africa. They are important to th
Page 19 and 20: 16 subsidy removal. The range of es
Page 21 and 22: 18 However, these studies ignore mu
Page 23 and 24: 20 reside in rural areas where prim
Page 25 and 26: 22 country will be W. 5 Thus P is t
Page 27 and 28: 24 In a net-importing country, the
Page 29: 26 found that low-income countries
Page 33 and 34: 30 FAO questionnaires. The FAO also
Page 35 and 36: 32 consumed, QC 0 , was 429.7 thous
Page 37 and 38: 34 Benin 1886.9 364.0 0.08% Burundi
Page 39 and 40: Central African Rep. -765.0 -319.9
Page 41 and 42: 38 positive effects decrease. One c
Page 43 and 44: 40 but not in 2001. However, these
Page 45 and 46: 42 Most important, the net welfare
Page 47 and 48: 44 consumers, as well as producers,
Page 49 and 50: 46 the rural population report that
Page 51 and 52: 48 17 The HICES provides the measur
Page 53 and 54: 50 Adult Equivalent Scale: 16 Male
Page 55 and 56: 52 Since only 12% of rural househol
Page 57 and 58: 54 missing all cereals values. We c
Page 59 and 60: 56 and sellers of cereals in urban
Page 61 and 62: 58 However, when we consider only t
Page 63 and 64: 60 MT, is produced domestically. 24
Page 65 and 66: 62 information. The high marketing
Page 67 and 68: 64 It is also important to note tha
Page 69 and 70: 66 Bibliography ActionAid. 2002.
Page 71 and 72: 68 Food and Agriculture Organizatio
Page 73 and 74: 70 Data Sources FAOSTAT, 2003-2004,
Page 75 and 76: 72 Net Welfare Effect of a 100% or
Page 77 and 78: 74 Net Welfare Effect of a 100% or
Page 79 and 80: Table 3: Net Welfare Effect of a 10
Page 81 and 82:
78 APPENDIX B: Household Data Table
Page 83 and 84:
80 Table 8. Household Expenditure p
Page 85 and 86:
Table 12. Households Participating
Page 87 and 88:
84 Table 13. Net Buyers and Sellers
Page 89:
Table 15. Net Buyers and Sellers of
show all

The Impact of a New WTO Agricultural Agreement ... - Tufts University

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?