Abstract
The Philippine government intervenes in the domestic rice market through the imposition of import tariffs and the provision of producer and consumer subsidies. While policymakers are aware that these programmes come with allocative efficiency costs, they justify the programmes on the grounds that they insulate the domestic economy from unexpected price spikes in the international rice market. An interesting matter for policy evaluation is to quantify the insulation benefit that the programmes provide in circumstances of sudden severe import price spikes. To examine this question, we undertake a dynamic computable general equilibrium (CGE) simulation in which the Philippines is subject to an external rice price shock. We find that the insulation benefit of the support programmes under a 2008-like event is worth approximately 0.10% of real consumption. However, the cost of insuring against these price spikes is significant. We estimate the annual cost of the rice market interventions at approximately 0.40% of real consumption.
Highlights
The Philippine government intervenes in the domestic rice market through the imposition of import tariffs and the provision of producer and consumer subsidies
We use data from Bureau of Agricultural Statistics (BAS), the Philippine Rice Research Institute (PRRI) and the National Food Authority (NFA) to calculate the values for the four largest direct interventions in the rice market: a subsidy on prices paid by rice consumers, a subsidy on prices received by paddy farmers, a subsidy on prices paid for seeds by paddy farmers, and a tariff on rice imports
We include in PHAGE four measures of food security: (i) the household food cover index (HFCI); (ii) the rice self-sufficiency index (RSSI), (iii) the food trade balance index (FTBI), and (iv) the household calorie intake index (HCII)
Summary
The Philippine government intervenes in the domestic rice market through the imposition of import tariffs and the provision of producer and consumer subsidies. Martin and Anderson (2011) and Anderson and Nelgen (2012) examine how efforts by individual countries to insulate their economies from spikes in world prices for food staples, through the varying of existing barriers to agricultural trade in response to price movements, may have contributed to the severity of these price events Such adjustments to support measures in the face of volatile food prices by a single country might augment the local insulation benefits provided by its existing interventions, notwithstanding simultaneous activity in this regard might be amplifying for global price movements. We examine the question for the Philippines using a dynamic economy-wide model with detailed treatment of agricultural activity, land use, and food security measures. Each of the broad food types are modelled as CRESH composites of disaggregated food types. For example, the staples bundle is a CRESH composite of rice, unmilled corn, milled corn, and legumes, tubers and root vegetables.
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