DOES GOVERNMENT INTERVENTION MATTER IN COMMODITY MARKET-MODELS

Recent modeling efforts of world agricultural commodity markets have used Producer and Consumer Subsidy Equivalents as the means of measuring government intervention, These measures are both qualitatively and quantitatively different from the more traditionally used nominal rate of protection. An additional measure, the Trade Distorting Equivalent, has also been proposed as a measure of intervention. This paper focuses on the use of these alternative measures of government intervention in agricultural trade models. In simulating a complete liberalization of government intervention in a multicountry, multicommodity model of the world cereals market, it is shown that each of these measures gives rise to considerable variation in results from this policy simulation exercise.