Research Reports
A Study on Developing a Rice Policy Evaluation Model in the Republic of Korea
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AuthorSung, Myunghwan
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Publication Date2003.12.01
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Original
A Study on Developing a Rice Policy Evaluation Model in the Republic of Korea
The purposes of this study are to develop policy evalua- tion model for the Korean rice industry and to investigate the effects of rice policies such as support measures, market price support, direct payments and input subsidies on economic costs and concerned parties including taxpayers, consumers, farm households, input suppliers, and government. For these purposes, rice policy evaluation model, which was developed by the OECD and Japan, applied to the Korean model. Each policy was analyzed under the assumption of 3% and 5% reduction or enlargement of support measures.
The reduction of market price support lowers rice production and farm price at the same time. The consumer price of rice gets low, but rice consumption and imports increase. In terms of welfare, net social costs decrease according to producers' surplus reduction, consumers' surplus increase and government's expenditure reduction.
When the fertilizer support was reduced, rice production decreased, but farm price increased to some degree. There were no changes in domestic consumption and consumer price. However, rice importation somewhat increased due to reduced production. But, government expenditure and social costs decrease. The total social welfare was lowered due to the reduction of fertilizer support.
When other input support was reduced, rice production decreased, but farm price increased a bit. There were no changes in producer' economic surplus, but government expenditure and social costs declined. Therefore, there was a positive effect of other input support reduction on total social welfare.
The enlargement of direct payments was analyzed without influencing production, input market and consumption. There were no changes in consumers' transfer costs, and the policy of direct payments only raised the expenditure of government. The estimated results suggest that direct payments relatively less distorting production than other forms of support. Consequently direct payment policy needs to be utilized for the income support of rice farming households.
Researchers: Sung Myung-Hwan, Yoon Ho-Seop, and
Kim Hye-Young
e-mail Address: mhsung@krei.re.kr, hoyoon@krei.re.kr,
hykim@krei.re.kr
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