Simulating the Effects of Supply and Demand Elasticities on Political-Economic Equilibrium
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World Bank, Washington, DC
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Wallace's (1962) pioneering study
brought to agricultural economics a focus on the role of
supply and demand elasticity's in determining the
efficiency with which agricultural policy transfers income
among interest groups. His discussion provides key insights
into what I call the "consequences of policy" side
of current models of political economy. Becker's (1983)
and Grossman and Helpman's (1994) models, both famously
seminal in the political economy literature, have such
"consequences" sides, and therefore when
agricultural policy is examined in their models'
frameworks, market elasticity's play key roles. These
two models have also "causes of policy" sides,
which describe interest groups' abilities to create
political pressure. Wallace aim is to provide a theoretical
review and exposition of the effects of elasticity's on
redistribution efficiency, and in turn on distortional
policies in political economic equilibrium. He demonstrates
how models of actual political economies might be built and
used to derive theoretical predictions about how market
elasticity's affect policy and income transfers.
Applying similar models to examine real world political
economies can provide testable hypotheses about how market
parameters affect distortional policies.
Palabras clave
AGRICULTURAL PRICE, AGRICULTURE, CLOSED ECONOMY, COMPETITIVE EQUILIBRIUM, CONSTANT RETURNS TO SCALE, CONSUMER PRICE, CONSUMER SURPLUS, CONSUMERS, COST INCREASES, DEMAND CURVE, DEMAND ELASTICITY, DEMAND FUNCTION, ECONOMIC EFFECTS, ECONOMIC EQUILIBRIUM, ELASTICITY, ELASTICITY OF DEMAND, ELASTICITY OF SUPPLY, EQUILIBRIUM PRICES, EXPENDITURES, EXPERIMENTAL ECONOMICS, EXTERNALITIES, FREE TRADE, GAME THEORY, GOVERNMENT INTERVENTION, INCOME, INTEREST GROUP, MARGINAL BENEFITS, MARGINAL COST, MARGINAL COSTS, MARGINAL VALUE, MONOPOLIES, NASH EQUILIBRIUM, OPPORTUNITY COST, POLITICAL ECONOMY, POLITICAL POWER, PRICE LEVEL, PRICE POLICY, PRICE SUPPORT, PRICE SUPPORTS, PRODUCER PRICE, SALE, SOCIAL COST, SOCIAL COSTS, SUBSTITUTE, SUPPLIERS, SUPPLY CURVE, SUPPLY ELASTICITY, SUPPLY FUNCTION, TAX, TAX REVENUES, TRADE POLICY, WELFARE ECONOMICS, WORLD POLITICAL ECONOMY