Overview
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 output. Moreover, agricultural taxes were easy to administer and extremely attractive in countries with a thin tax base. Also, shifting scarce resources to industry was thought to be justified by agriculture ' s declining terms of trade and by the rising protection in industrial countries. This research asks two basic questions: Is agriculture really that unresponsive to price incentives? And can countries develop faster and at lower cost by taxing agriculture? The authors examined how price interventions affect agricultural growth and overall economic growth and they measured the income transfers that price interventions induced among agriculture, government, and the rest of the economy. To see whether controls on food prices helped the poor, they studied the effects of price interventions on the incomes of the rural and urban poor in the short- and long-run. To see whether the policies for the prices of agricultural commodities kept them stable, they separated the effects of those policies from the effects of other forces determining commodity prices. The findings of this study provide a solid base for prescribing agricultural price policy.Synopsis
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 output. Moreover, agricultural taxes were easy to administer and extremely attractive in countries with a thin tax base. Also, shifting scarce resources to industry was thought to be justified by agriculture ' s declining terms of trade and by the rising protection in industrial countries. This research asks two basic questions: Is agriculture really that unresponsive to price incentives? And can countries develop faster and at lower cost by taxing agriculture? The authors examined how price interventions affect agricultural growth and overall economic growth and they measured the income transfers that price interventions induced among agriculture, government, and the rest of the economy. To see whether controls on food prices helped the poor, they studied the effects of price interventions on the incomes of the rural and urban poor in the short- and long-run. To see whether the policies for the prices of agricultural commodities kept them stable, they separated the effects of those policies from the effects of other forces determining commodity prices. The findings of this study provide a solid base for prescribing agricultural price policy.