The volatility of food prices has always concerned national governments, especially those of open developing economies, as it undermines their perceived national food security. A common policy approach has been to partially insulate their domestic market from international food price fluctuations by varying restrictions on their imports or exports. Unfortunately, such domestic stabilization measures amplify international price fluctuations. This article explains conceptually, and illustrates empirically, how insulation measures do little to advance national food security and collectively imperil global food security. Many countries also intervene to alter the trend level of domestic farm product prices, again most commonly with the use of trade restrictions. The latter policies have the unintended consequence of thinning international food markets, adding to their volatility. The article concludes by pointing to alternative ways for governments to boost food security for vulnerable households; such alternatives have become far more feasible in recent times, thanks to the information and communication technology revolution.


Article metrics loading...

Loading full text...

Full text loading...


Literature Cited

  1. Adato M, Hoddinott J. 2010. Conditional Cash Transfers in Latin America Baltimore, MD: Johns Hopkins Univ. Press for IFPRI
  2. Alatas V, Banerjee A, Hanna R, Olken BA, Tobias J. 2012. Targeting the poor: evidence from a field experiment in Indonesia. Am. Econ. Rev. 102:41206–40 [Google Scholar]
  3. Anderson JE, Neary JP. 2005. Measuring the Restrictiveness of International Trade Policy Cambridge, MA: MIT Press
  4. Anderson K. 1995. Lobbying incentives and the pattern of protection in rich and poor countries. Econ. Dev. Cult. Change 43:2401–23 [Google Scholar]
  5. Anderson K, ed. 2009. Distortions to Agricultural Incentives: A Global Perspective, 1955–2007. London/Washington, DC: Palgrave Macmillan/World Bank
  6. Anderson K. 2010. The Political Economy of Agricultural Price Distortions Cambridge, UK/New York: Cambridge Univ. Press
  7. Anderson K, Ivanic M, Martin W. 2014. Food price spikes, price insulation, and poverty. In The Economics of Food Price Volatility, ed. J-P Chavas, D Hummels, B Wright, Chapter 8. Chicago: Univ. Chicago Press for NBER. Forthcoming
  8. Anderson K, Nelgen S. 2012. Agricultural trade distortions during the global financial crisis. Oxf. Rev. Econ. Policy 28:2235–60 [Google Scholar]
  9. Anderson K, Nelgen S. 2013. Updated national and global estimates of distortions to agricultural incentives, 1955 to 2011. Database. http://www.worldbank.org/agdistortions
  10. Anderson K, Rausser G, Swinnen JFM. 2013. Political economy of public policies: insights from distortions to agricultural and food markets. J. Econ. Lit. 51:2423–77 [Google Scholar]
  11. Anderson K, Valenzuela E. 2008. Estimates of global distortions to agricultural incentives, 1955 to 2007. World Bank, Washington, DC. http://www.worldbank.org/agdistortions
  12. Arvis J-F, Duval Y, Shepherd B, Utoktham C. 2012. Trade costs in the developing world: 1995–2010. ARTNeT Work. Pap. 121, UN ESACP, Bangkok. http://www.unescap.org/tid/artnet/pub/wp.asp
  13. Bellemare C, Kroger S, van Soest A. 2008. Measuring inequality aversion in a heterogeneous population using experimental decisions and subjective probabilities. Econometrica 76:4815–39 [Google Scholar]
  14. Briones RM. 2011. Regional cooperation for food security: the case of emergency rice reserves in the ASEAN Plus Three. Sustain. Dev. Work. Pap. 18, Asian Dev. Bank, Manila
  15. Corden WM. 1997. Trade Policy and Economic Welfare Oxford, UK: Clarendon., Rev. ed.
  16. de Gorter H, Drabik D, Just DR, Kliauga EM. 2013. The impact of OECD biofuels policies on developing countries. Agric. Econ. 44:4–5477–86 [Google Scholar]
  17. Engelmann D, Strobel M. 2004. Inequality aversion, efficiency, and maximin preferences in simple distribution experiments. Am. Econ. Rev. 94:4857–69 [Google Scholar]
  18. Fan S, Torero M, Healey D. 2011. Urgent action needed to prevent recurring food crises. Policy Brief 16, IFPRI, Washington, DC
  19. FAO 2003. Food security: concepts and measurement. Trade Reforms and Food Security: Conceptualizing the Linkages Chapter 2 Rome: FAO [Google Scholar]
  20. FAO, IFAD, IFPRI, IMF, OECD, UNCTAD, et al. 2011. Price volatility in food and agricultural markets: policy responses. Backgr. Policy Rep., G20 Summit, Paris, Nov
  21. Feenstra R. 1995. Estimating the effects of trade policy. Handbook of International Economics Vol. 3 Grossman G, Rogoff K. 1553–95 Amsterdam: Elsevier [Google Scholar]
  22. Fiszbein A, Schady N, Ferreira FHG, Grosh M, Kelleher N, et al. 2009. Conditional cash transfers: reducing present and future poverty. Policy Res. Rep., World Bank, Washington, DC
  23. Freund C, Özden C. 2008. Trade policy and loss aversion. Am. Econ. Rev. 98:41675–91 [Google Scholar]
  24. Jean S, Laborde D, Martin W. 2010. Formulas and flexibility in trade negotiations: sensitive agricultural products in the WTO’s Doha Agenda. World Bank Econ. Rev. 24:3500–19 [Google Scholar]
  25. Hertel T, Martin W, Leister A. 2010. Potential implications of a special safeguard mechanism in the World Trade Organization: the case of wheat. World Bank Econ. Rev. 24:2330–59 [Google Scholar]
  26. Hoddinott JF, Rosegrant MW, Torero M. 2013. Hunger and malnutrition: investments to reduce hunger and undernutrition. Global Problems, Smart Solutions: Costs and Benefits Lomborg B. 332–74 Cambridge/New York: Cambridge Univ. Press [Google Scholar]
  27. Krueger AO, Schiff M, Valdés A. 1988. Agricultural incentives in developing countries: measuring the effect of sectoral and economy-wide policies. World Bank Econ. Rev. 2:3255–72 [Google Scholar]
  28. Lusk JL, Briggeman BC. 2011. Selfishness, altruism, and inequality aversion toward consumers and farmers. Agric. Econ. 42:2121–39 [Google Scholar]
  29. Martin W, Anderson K. 2012. Export restrictions and price insulation during commodity price booms. Am. J. Agric. Econ. 94:2422–27 [Google Scholar]
  30. Minot N. 2011. Transmission of world food price changes to markets in sub-Saharan Africa. Discuss. Pap. 1,059, IFPRI, Washington, DC
  31. Nelgen S. 2012. Distortions to agricultural markets: trends and fluctuations, 1955 to 2010. PhD Thesis, Univ. Adelaide
  32. Nerlove M. 1972. Lags in economic behaviour. Econometrica 40:2221–52 [Google Scholar]
  33. OECD 2013. Producer and consumer support estimates: OECD database 1986–2012. http://www.oecd.org/chile/producerandconsumersupportestimatesdatabase.htm
  34. Skoufias E, Tiwari S, Zaman H. 2010. Can we rely on cash transfers to protect dietary diversity during food crises? Estimates from Indonesia. Policy Res. Work. Pap. 5,548, World Bank, Washington, DC
  35. Sturzenegger A, Salizna M. 2008. Argentina. Distortions to Agricultural Incentives in Latin America Anderson K, Valdés A. 59–85 Washington, DC: World Bank [Google Scholar]
  36. Thennakoon J, Anderson K. 2013. Could the proposed WTO special safeguard mechanism protect farmers from low international prices? Unpub. Pap., Univ. Adelaide
  37. Tyers R, Anderson K. 1992. Disarray in World Food Markets: A Quantitative Assessment Cambridge/New York: Cambridge Univ. Press
  38. World Bank 2011. Pink sheets. http://go.worldbank.org/4ROCCIEQ50
  39. Wright BD. 2011. The economics of grain price volatility. Appl. Econ. Perspect. Policy 33:132–58 [Google Scholar]

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error