The Normative Efficiency Ranking of Output and Export Subsidies under Costly and Imperfect Enforcement

This paper builds on the literature on agricultural policy analysis under costly and imperfect enforcement by analyzing the effect of enforcement costs and noncompliance on the relative transfer efficiency of output and export subsidies. Analytical results show that, in addition to changing the incidence of output and export subsidies, relaxing the assumption of perfect and costless enforcement found in the traditional analysis of these policy instruments can affect their relative efficiency in transferring income to producers. The effect of enforcement issues is shown to depend on the way export subsidies are being administered and the size of the exporting country.