The effects of maize marketing policy reforms in Zambia
Abstract
Zambia is currently pursuing various maize market policy reforms that have been necessitated by a deteriorating economic situation and donor demands. This study estimates the effects of the Zambian maize market reforms to provide information on the nature and effects of a liberalized market. An innovative form of a spatial equilibrium model is used to analyze the effects of fully panterritorial pricing, intraregional liberalization, full liberalization and targeted intervention (policies that have either been implemented or are under consideration for implementation in Zambia) on producer and consumer prices, production and consumption, welfare and the government budget in both the normal and drought years. This new approach permits the calibration of the model under one policy scenario such that it can then be used to simulate another policy regime, therefore generates a more realistic pattern of the effects of liberalization. Because the method explicitly captures local farm-to-market transport costs it also allows us to analyze the intraregion effects of liberalization. The main findings of this study are (1) full liberalization generates substantial price variability across depots, (2) stock build up reduces price variability and stock releases increase the price variability across regions, (3) intraregion liberalization increases the producer-consumer price spread and producers bear most of this increase in the price spread especially in the drought year when they are relatively more inelastic, (4) liberalization reduces the quantities traded and the transport costs, (5) liberalization improves national welfare whether modelled with the conventional method or the new continuous spatial representation but the gains from liberalization are higher and losses lower when the market is represented by the new continuous space method and (6) the new representation of the market shows that the gains from full liberalization are much higher than those from intraregion liberalization. These results should facilitate a clear discussion about effects of liberalization on prices, domestic trade, producer and consumer welfare and the government budget and should enhance reforms implementation in Zambia and in other countries where the model can be applied.
Degree
Ph.D.
Advisors
Preckel, Purdue University.
Subject Area
Agricultural economics
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