Title: Agricultural Policy Adjustments in East Asia: The Korean Rice Economy
Published in: Working Papers Series
Author/s: Yong Dae Kwon and Hiroshi Yamauchi*
The processes of agricultural policy decision-making in the East Asian economies of Japan, Taiwan, and Korea are characterized by the complex interactions of competing special interest groups in their respective political arenas. An analytical model is designed to investigate how adjustments in rice price policies are endogenously related to the political economic forces associated with macroeconomic changes. The model is tested against the case of Korean rice price policy, which has not been satisfactorily explained in earlier modeling efforts. A political preference function is used to estimate the relative political weights of producers, consumers, and government over a 25-year period (1961-1985) during which major macroeconomic changes occurred. A simultaneous 12-equation model is then constructed to explore the effects of the macroeconomic changes on the rice pricing decisions through the estimated political weights. Highly significant econometric results are obtained to explain the pattern of increasing political influence of producers relative to that of consumers and government. Simulation experiments show how the patterns in the rice economy are linked to macroeconomic change. The results obtained, thus far, open the way for methodological improvements to further our functional understanding of agricultural policy adjustments in Korea and other East Asian economies.