OECD agricultural subsidies and poverty rates in lower income countries

Abstract

We investigate the implications of the OECD support for agriculture on the headcount poverty rates of developing countries. Following the strategy proposed by McMillan, Peterson Zwane, and Ashraf (2005, 2007), we estimate the cross-country empirical framework building a new OECD policy index and applying different panel data techniques. In addition to the standard parametric model estimators, we also use the finite mixture models to detect heterogeneous effects of the OECD policy index within our sample. We find statistically significant evidence that OECD agricultural policies worsened the poverty rates in some developing countries. Most of the main food exporters appear in fact to be negatively affected by the OECD support for agriculture while the impact detected on food importers is not significant or near to zero