Output and Input Subsidy Policy Options in Bangladesh

Recent changes in pricing policies emphasizing price supports and phasing out fertilizer subsidies are a step in the right direction, particularly if minimizing the combined foreign exchange and budgetary expenditures of Bangladesh and donor nations is the key objective. A normalized restricted profit function is used to estimate profit and factor demand functions from farm-level, cross-sectional data for the food grain and jute crops in Bangladesh. The estimated elasticities are used to evealuate price support and fertilizer subsidy programs in terms of then costs to the government, foreign exchange effects and producer surplus for the food grain and jute sectors.