Interest Groups and the Price of Cereals in Kenya
simultaneous subsidies to producers and consumers
Abstract
This article examines Kenya's post-independence cereals pricing policy (maize, wheat, and rice) within a political economy framework. The model posits commodity pricing policy decisions in terms of balancing the conflicting interests of consumers, producers, and the government's budget. Empirical results confirm that policy outcomes are influenced by urban consumers, farmers, and, more recently, by structural adjustment programs. Furthermore, perpetual deficits by the marketing board handling cereals can be explained by the simultaneous subsidies to producers and consumers. In fact, structural adjustment programs have moved prices closer to free market levels by disengaging government involvement, reducing the cost of operating the marketing boards but increasing the political cost to the Kenyan government.
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2013-05-27
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