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Importing High Food Prices by Exporting: Rice Prices in Lao PDR

Journal article
Authors Dick Durevall
Roy van der Weide
Published in Journal of Agricultural Economics
Volume 68
Issue 1
Pages 164–181
ISSN 0021-857X
Publication year 2017
Published at Gothenburg Centre for Globalization and Development (GCGD)
Department of Economics
Pages 164–181
Language en
Links https://doi.org/10.1111/1477-9552.1...
Keywords Food prices; free trade; price spikes; rice prices; trade policy; welfare.
Subject categories Economics

Abstract

Lao PDR has extensive export controls on its staple food, glutinous rice, which keep domestic prices low relative to international prices. Using price, harvest, and export data this paper analyses how glutinous rice prices in Laos PDR are related to those in its trading partners, Thailand and Vietnam. We find that rice prices in Lao PDR are more likely to rise following a good harvest year than a bad or a normal year. This is consistent with export controls being relaxed after good harvests, leading to an increase in exports early in the season and rising prices later as stocks are depleted. There is thus a case for removal of trade restrictions since they give rise to price spikes while keeping the long-term price of glutinous rice low, and thereby hinder increases in income from agriculture. However, since high rice prices are likely to affect the poor negatively in the short to medium term, a combination of an export tax and cash transfers is recommended during the transition period. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food.

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