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The Microeconomics of the Developmental Paradox: On the Political Economy of Food Price Policy

A longstanding puzzle in comparative economics is the 'developmental paradox', the tendency for government support for agriculture to increase with national income and to decrease with the proportion of economic activity and of the population in agriculture. This paper offers a microeconomic explanation for that puzzle. It establishes analytically the microeconomic basis for coalition alignments with respect to food price policy, then numerically simulates the comparative static effects of alternative food policies on coalition structure. A parsimonious household model applied to a heterogeneously endowed society demonstrates how variation in individual welfare effects might beget distinct coalitions in the debate over food price policy and how those policies are inextricably linked to land, population, and technology policies in food agriculture. Moreover, coalition alignments on particular policy debates are path-dependent. In particular, food price policy creates its own political support. © 1999 Elsevier Science B.V. All rights reserved.