Impact of Green Box Subsidies on Agricultural Productivity, Production and International Trade

Abstract

This paper provides empirical evidence on the production- and trade-distorting effects of the Green Box (GB) subsidies of developed countries. It reviews the theoretical and empirical literature, which argues that the impacts of GB subsidies on production and trade operate via increases in risk-taking capacities, land prices, credit availability, labour participation and expectations, before presenting results of data envelopment analyses which estimate the impact of GB subsidies on agricultural productivity in 26 countries over the period 1995–2010. It also presents the results of the impact of reduction in GB subsidies on production, export volumes, import volumes, export revenues and imports costs using Agriculture Trade Policy Simulation Model. Results are presented at the regional level, including for LDCs and Net Food Importing Countries. It concludes with suggestions on disciplining GB subsidies.