Well below international prices crops sold at over

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Unformatted text preview: ing the fact that taxes from rural areas are difficult to collect) Government- imposed price distortions cause inputs into rural areas to be overprived (and outputs from rural areas to be correspondingly underpriced) ! they were transferring money from rural areas to urban areas Inputs expensive: Labor Credit Outputs cheaper Food Distributional bias + price distortion = inefficiency Problems? At the margin money should earn higher returns in the small agriculture sector or rural non- garm sector that it will in cities or large- scale urban based industries Inter- sectoral terms of trade should be against rural areas (again, limited evidence) URBAN BIAS (Political- economic version) Bates took lipton’s theory Food production problems were a result of discrimination against smallholders Main purpose: not to “industrialize” as with lipton but to prevent unrest in towns and cities Farmers being rational should normally respond by under- producing; governments compensate by: Subsidizing farms Taking over agro- business Importing food Marketing boards and state revenue; Traditionally agricultural production in PPEs was managed through state- owned marketing boards: Monopsonies in domestic markets Monopolies in commodity exports Local produces prices usually kept well below international prices; crops sold at over- valued exchange rates ! allowed governments to pocket the difference. Revenue still shrinking Structural adjustment and agricultural reform: Most urban- biased attempts to control food markets in SSA faield: Controlling market for domestic food crops (not export crops) was difficult Significant rent- seeking collusion between farmers and bureaucrats Where elites’ engaged...
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