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Maurice W. Schiff - The plundering of agriculture in developing countries, Page 74

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This digital document is an article from Finance & Development, published by International Monetary Fund on March 1, 1995. The length of the article is 3602 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.From the supplier: Conventional wisdom in the 1960s and 1970s held agriculture to be a sector fairly unresponsive to economic incentives. In the 1980s, however, this piece of conventional wisdom was placed to a test as it became apparent that it was not always true since events showed that agriculture could be influenced by events external to the sector such as exchange rates and industrial policy. A reassessment of agricultures role in developing countries has since revealed that excessive government intervention in the agricultural sector has had a much more negative effect than previously assumed. According to recent research, government-imposed price interventions, have had a negative consequences on income distribution, the budget, growth and income transfers.Citation DetailsTitle: The plundering of agriculture in developing countries. (Latin America and the Caribbean: The Challenges Ahead)Author: Maurice SchiffPublication: Finance & Development (Magazine/Journal)Date: March 1, 1995Publisher: International Monetary FundVolume: v32 Issue: n1 Page: p44(4)Distributed by Thomson Gale

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title The Plundering of Agriculture in Developing Countries author - photo 1

title:The Plundering of Agriculture in Developing Countries
author:Schiff, Maurice W.; Valdes, Alberto
publisher:World Bank
isbn10 | asin:0821321846
print isbn13:9780821321843
ebook isbn13:9780585231471
language:English
subjectAgriculture--Economic aspects--Developing countries.
publication date:1992
lcc:HD1417.S32 1992eb
ddc:338.1/09172/4
subject:Agriculture--Economic aspects--Developing countries.
Page i
The Plundering of Agriculture in Developing Countries
Maurice Schiff
Alberto Valds
The plundering of agriculture in developing countries Page 74 - image 2
Page ii
1992 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N. W. Washington, D. C. 20433
All rights reserved Manufactured in the United States of America First printing September 1992
The findings, interpretations, and conclusions expressed in this study are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent.
The cover photograph shows a detail of a poncho from Cuzco, Peru, typical of those worn by Quechua farmers.
Library of Congress Cataloging-in-Publication Data
Schiff, Maurice W.
The plundering of agriculture in developing countries / Maurice
Schiff, Alberto Valds.
p. cm.
Includes bibliographical references.
ISBN 0-8213-2184-6
1. AgricultureEconomic aspectsDeveloping countries.
I. Valds, Alberto, date. II. Title.
HD1417.S32 1992
338.1'09172'4dc20Picture 3 92-26620
CIP
Page iii
Contents
Preface
v
The Average Tax on Agriculture Was Huge
4
The Transfers Out of Agriculture Have Been Enormous
7
Agricultural Growth Was Slowed by Taxation
8
Economic Growth Was Slowed by Agricultural Taxation
10
Farmers Do Respond to Price Incentives
12
Price Interventions Affect the Budget in Many Ways
14
The Contribution to Revenue Can Be Considerable
15
Price Distortions in Agriculture Have Increased
18
Direct Interventions Raised the Cost of Food to Urban Consumers Somewhat
20
Direct Interventions Reduced the Variability in Producer Prices
23
Direct Interventions Stabilized the Prices of Staples More Than Those of Other Products
25
Direct Interventions Reduced the Variability in Consumer Prices in Most Countries
25
For Urban Consumers, the Short-Run Income Losses Were Small in Most Countries
26
For the Rural Poor, the Short-Run Income Losses Were Substantially Larger
28
In the Long Term, the Poor Have Probably Lost Disproportionately
29

Page iv
What Happens If Many Developing Countries Reform Agricultural Prices at the Same Time?
33
Price and Trade Reform Lessons
35
References
36

Page v
Preface
The findings and policy implications presented in this booklet are based on a World Bank comparative study of agricultural pricing policies in developing countries, which examined agricultural pricing interventions in eighteen developing countries during 196085. The results of the study have been published in a five-volume series, The Political Economy of Agricultural Pricing Policy (Baltimore, Md.: Johns Hopkins University Press). Volumes 1, 2 and 3 are regional; 1 is on Asia, 2 is on Latin America, and 3 is on Africa and the Mediterranean (all were edited by Anne O. Krueger, Maurice Schiff, and Alberto Valds). Volumes 4 and 5 are syntheses. This booklet draws mainly on the findings of volume 4, A Synthesis of the Economics in Developing Countries (by Maurice Schiff and Alberto Valds). Volume 5 is A Synthesis of the Political Economy in Developing Countries (by Anne O. Krueger). The authors would like to thank Bruce Ross-Larson for his excellent editorial work and Harold Alderman, Johannes Linn, and Michel Petit for their useful comments.
Page 1
Industry has been the darling of development, certainly for the now-industrial countries, and more recently for the developing countries. Those with the reins of policy in developing countries decided that agriculture was impervious to price incentives, so they believed that taxing it would sacrifice little in outputor so went the conventional wisdom. Moreover, agricultural taxes were easy to administer and extremely attractive in countries with a thin tax base. In addition, shifting scarce resources to industry was thought to be justified by agriculture's declining terms of tradea pound of agricultural exports was buying less and less than a pound of industrial importsand by the rising protection in industrial countries. So policymakers taxed the daylights out of agriculture, secure that they were doing the right thing. (The term
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