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Optimal agricultural policy and PSE measurement : an assessment and application to Norway

Blandford, David; Brunstad, Rolf Jens; Gaasland, Ivar; Vårdal, Erling
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URI
http://hdl.handle.net/11250/163092
Date
2007-10
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  • Discussion papers (SAM) [579]
Abstract
The producer support estimate (the successor to the producer support equivalent) calculated

by the OECD is widely used as an indicator of distortions created by agricultural policies. In

this paper we demonstrate that changes in the relative (percentage) PSE are not an accurate

indicator of the implications of policy reform for domestic welfare or for trade distortions.

We demonstrate that it is important to consider the implications of changes in both the level

and the form of support in evaluating the impact of policy reform. Using a model of

Norwegian agriculture we show that reforms indicated towards the provision of public

goods, while apparently leading to an increase in relative support, are actually superior to

existing agricultural policies or to a policy aimed at eliminating subsidized exports both in terms of reducing trade distortions and increasing domestic economic welfare.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2007:28

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