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THE POLICY ANALYSIS MATRIX IN AGRICULTURAL DEVELOPMENT

SECTION I. THE PRACTICE OF AGRICULTURAL POLICY ANALYSIS

Framework for Agricultural Policy Analysis

Effectiveness of Price Policies

Linkages between Macroeconomic and Agricultural Price Policies

The Policy Analysis Matrix

Price Policy Graphs

Concluding Comments

SECTION II. INTRODUCTION TO THE POLICY ANALYSIS MATRIX

Practical Issues Addressed

The Policy Analysis Matrix

Private Profitability

Social Profitability

Effects of Divergences

Comparisons among Agricultural Systems Producing Different Outputs

Private Profitability

Social Profitability

Policy Transfers

Dynamic Comparative Advantage

Concluding Comments

SECTION III. INTERPRETATION AND COMMUNICATION OF PAM RESULTS

Interpretation of the Effects of Divergences

Output Transfers

Tradable-Input Transfers

Factor Transfers

Net Transfers

The Policy Analysis Matrix and Agricultural Planning

The PAM and Price Policy Analyses

PAM and Investment Policy Analysis

PAM and Agricultural Research Policy Analysis

Communicating Results to Policy-Makers

Essential Elements of Policy Memos

Policy Issues

Method of Analysis

Information Needs

Interpretation of Results

Implications of the Results for National Interest Groups

International Ramifications of the Results

Summary of the Pros and Cons of Policy Choices

Illustration of Elements of a Policy Memo

1. Policy Issues

2. Method of Analysis

3. Information Needs

4. Interpretation of Results

5. Implications of Results for National Interest Groups

6. International Ramification of Results

7. Summary of the Pros and Cons o f Policy Choices

Concluding Comments

ECONOMIC ANALYSIS OF AGRICULTURAL PROJECTS

SECTION I. IDENTIFYING PROJECT COSTS AND BENEFITS

Objectives, Costs, and Benefits

"With" and "Without" Comparisons

Direct Transfer Payments

Costs of Agricultural Projects

Physical goods

Labor

Land

Contingency allowances

Taxes

Debt service

Sunk costs

Tangible Benefits of Agricultural Projects

Increased production

Quality improvement

Change in time of sale

Change in location of sale

Changes in product form (grading and processing)

Cost reduction through mechanization

Reduced transport costs

Losses avoided

Other kinds of tangible benefits

Secondary Costs and Benefits

Intangible Costs and Benefits

SECTION II. PRICING PROJECT COSTS AND BENEFITS

Prices Reflect Value

Finding Market Prices

Point of first sale and farm-gate price

Pricing intermediate goods

Other problems in finding market prices

Project boundary price

Predicting Future Prices

Changes in relative prices

Inflation

Prices for Internationally Traded Commodities

Financial Export and Import Parity Prices

SECTION III. DETERMINING ECONOMIC VALUES

Determining the Premium on Foreign Exchange

Adjusting Financial Prices to Economic Values

Step 1. Adjustment for direct transfer payments

Step 2. Adjustment for price distortions in traded items

Step 3. Adjustment for price distortions in nontraded items

Economic export and import parity values

Trade Policy Signals from Project Analysis

Valuing Intangible Costs and Benefits

Decision Tree for Determining Economic Values


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