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Abstract
Government policies are inherently imperfect, potentially unstable and have pervasive impacts on commodity markets and trade. The actions of government policy makers have direct implications for producers and consumers. Government policies are responsive to the influence of groups seeking to increase their own welfare at the expense potentially of an outcome that is economically inefficient. Yet researchers typically treat the role of government as an exogenous influence.
The objective of this dissertation is to address the issue of instabilities and imperfections in government policies by modeling the means for comprehensive short-run government price forecasts and by explaining the underlying welfare rationale of government policy. Behavioral equations are specified for both private and public sectors of the Syrian sugar market. The dissertation applies welfare economic concepts, in terms of weights or indices for each of the various groups, to government intervention in the market for a single commodity, and presents a method, featuring econometric techniques, by which these concepts can be applied.
It is postulated that government behaves in a purposeful and logical manner in setting domestic prices in the sense that it attempts to maximize some objective function which incorporates the welfare of producers, consumers and taxpayers with preference for price stability, and assigns weights to each claimant group.
Consistent with the model's assumptions, results indicate that sugarbeet producers are irresponsive to price changes, and prices received by farmers failed to be an effective instrument in stimulating production.
Results indicate that government sets free prices at levels which reflect the availability of sugar relative to expected demand. However, a black market in sugar is evidence of less than fully enlightened policies.
The overall welfare implication of the results is that the government of Syria pursued active intervention which entailed substantial income redistribution from sugar consumers and taxpayers to sugarbeet producers before 1973, and from taxpayers to sugar consumers and sugarbeet producers after 1973. Income redistribution and price stability goals were preferred over goals that would have promoted competition and economic efficiency.
