By OECD (Organisation for Economic Co-operation and Development)
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Extra info for Agricultural Policy and Trade Reform, Potential Effects at Global, National and Household Levels
Indeed, there may be cases where reform-induced increases in returns to their labour and capital employed off the farm more than off-set reduced farm AGRICULTURAL POLICY AND TRADE REFORM: POTENTIAL EFFECTS AT GLOBAL, NATIONAL AND HOUSEHOLD LEVELS – ISBN-92-64-02573-1 © OECD 2006 Chapter 2. Global Market, National and Sectoral Impacts – 41 incomes. Chapter III explores some of these questions in some more depth, looking at the multiple sources of impacts on farm household incomes across a broad range of representative farm household types.
Returns to land The economic return a landowner earns per unit area of land used in farming6 — the implicit rental rate — can usefully be viewed here as the sum of two payments: a factor payment reflecting what land would earn with production valued at producer prices and a budgetary payment based on area. Government interventions that boost producer prices — trade protection or payments per unit of output — automatically increase factor payments, including those to land. Area payments may be made instead of or perhaps in addition to price support.
Moreover, the model does not address implementation and adjustment costs which may accompany policy change, especially policy change in a developing country context (Charlton and Stiglitz, 2005). Policy reform is often assumed, including in the present study, to occur in a situation of full employment. In such circumstances the pattern of wage rates and sectoral employment may change but not the total number of people employed. In the presence of unemployment, a particularly common situation in developing countries, trade reform may change the total number of people employed (or the number of total hours they work) with little influence on wage rates.