THE POLITICAL-ECONOMY OF SYSTEMATIC GOVERNMENT INTERVENTION IN AGRICULTURE

There is a systematic pattern of government policy intervention in agr iculture by developed and developing countries. This paper attempts to provide a political economy explanation of these policy interventions . A simple political economy model with two interest groups is develop ed following Becker and Gardner. This framework brings interest group competition formally into the political preference function. In this m odel, interest groups' competitive lobbying expenditures cause changes in policies by changing the relative political weights. An empirical political economy model is specified and estimated for wheat using dat a for 12 developed and 13 developing countries from 1958 to 1987. The results suggest that the labor productivity ratio, agriculture's inter national terms of trade and the share of food in disposable income are the most important factors influencing the systematic subsidization o f wheat producers in developed countries, while the factor endowment r atio, agriculture's international terms of trade and the share of impo rts financed by agricultural exports are the most important factors co ntributing to the systematic exploitation of wheat producers in develo ping countries. The results also suggest that the incentive mechanism in agricultural price policy changes gradually.