Explaining Inefficient Policy Instruments

The purpose of this paper is to provide an overview of the literature on the political economy of policy instrument choice and relate it to the experiences in agriculture. The paper is therefore organized as follows. The second section provides a ranking of policies as to their transfer efficiency and determines the standard of evaluation, given that no policy is perfect in achieving its goals. The third section explores why political competition does not ensure that an efficient policy instrument is chosen. The following two sections explain the two key theories: enforcement and commitment problems in section four, and information and agency problems in section five. Section six presents the important Grossman-Helpman model of inefficient policy choice that falls outside these two general theories. Section seven describes how policy instrument choice in agriculture is often a discrete outcome in response to a crisis and therefore becomes path dependent, resulting in a status quo bias. Section eight describes how trade agreements can affect policy instrument choice. The final section gives some guidance as to the outstanding issues.

Bibliographic Details

Main Author:	de Gorter, Harry
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2008-08
Subjects:	ADJUSTMENT ASSISTANCE, AGENCY PROBLEMS, AGRICULTURE, ALLOCATION, ASSET VALUES, ASYMMETRIC INFORMATION, AVERAGE COSTS, BANKS, BARGAINING, BARGAINING POWER, BOND, BUDGET DEFICIT, BUREAUCRACY, CASH PAYMENTS, COLLECTIVE ACTION, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, COMPARATIVE ECONOMICS, CONSUMERS, CORRUPTION, DEMOCRACIES, DEPRESSION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DIRECT PAYMENTS, DISCOUNT RATE, DISCRETION, DIVIDEND, DOMESTIC PRICE, DUMPING, DYNAMIC ANALYSIS, ECONOMIC ANALYSIS, ECONOMIC CRISIS, ECONOMIC DEVELOPMENT, ECONOMIC FORCES, ECONOMIC GROWTH, ECONOMIC HISTORY, ECONOMIC MODELS, ECONOMIC REFORMS, ECONOMIC THEORY, ECONOMICS, ECONOMICS LITERATURE, EFFICIENT OUTCOMES, ENFORCEMENT OF CONTRACTS, EQUILIBRIUM ANALYSIS, EXCHANGE RATE, EXPORTS, FOOD PRICE, FOOD PRICES, FREE MARKETS, FREE TRADE, GAME THEORY, GDP, GENERAL EQUILIBRIUM, GOVERNMENT ACTIONS, GOVERNMENT INTERVENTION, HARMONIZATION, IMPERFECT INFORMATION, IMPORT BARRIERS, IMPORT QUOTAS, INCOME, INCOME DISTRIBUTION, INCOME EFFECT, INCOME TAX, INCOME TAXES, INCOMES, INCREASING RETURNS, INCUMBENT, INEFFICIENCY, INELASTIC DEMAND, INFORMATION ASYMMETRIES, INITIATIVE, INSTITUTIONAL ECONOMICS, INSURANCE, INTEREST GROUP, INTERNATIONAL LAW, INTERNATIONAL ORGANIZATION, INTERNATIONAL TRADE, LABOR MARKETS, LABOR SUPPLY, LEADERSHIP, LEGITIMACY, LOBBYING, LUMP SUM TRANSFERS, MARKET CONDITIONS, MARKET DISTORTIONS, MARKET FAILURE, MARKET FAILURES, MARKET PRICE, MATHEMATICAL ECONOMICS, MONOPOLY, MOTIVATION, PATRONAGE, PENALTIES, POLICES, POLITICAL DEMOCRACY, POLITICAL ECONOMY, POLITICAL PARTY, POLITICAL POWER, POLITICAL PROCESS, POLITICAL REGIME, POLITICAL SCIENCE, POLITICAL SYSTEM, POLITICIAN, POLITICIANS, POLLUTION, PREFERENCE FUNCTIONS, PRICE DISCRIMINATION, PRICE DISTORTION, PRICE DISTORTIONS, PRICE POLICIES, PRIVATE SECTOR, PRODUCTION COSTS, PRODUCTIVITY, PROPERTY RIGHTS, PUBLIC GOODS, PUBLIC POLICIES, REAL WAGES, REMEDY, RENT SEEKING, REPUTATION, SAFETY, SAFETY NETS, SAVINGS, SETTLEMENT PROCEDURES, SMALL COUNTRIES, SOCIAL BENEFITS, SOCIAL COSTS, STRUCTURAL CHANGE, SUPPLY CURVE, SUSTAINABLE DEVELOPMENT, TAX, TAX REVENUES, TAXATION, TOTAL OUTPUT, TRADE BARRIERS, TRADE LIBERALIZATION, TRADE NEGOTIATIONS, TRADE POLICIES, TRADE POLICY, TRADE-OFF, TRADES, TRANSACTION COSTS, TRANSACTIONS COSTS, TRANSPARENCY, URUGUAY ROUND, VOTERS, WAGE TAXES, WAGES, WEALTH, WELFARE ECONOMICS, WTO,
Online Access:	http://documents.worldbank.org/curated/en/585151468329339087/Explaining-inefficient-policy-instruments https://hdl.handle.net/10986/28275
Tags:	Add Tag No Tags, Be the first to tag this record!