Implications of structural policies on the wheat market – comparative static and dynamic analysis for the EU and US

Abstract

Structural policy instruments can directly influence agricultural production, productivity, and other market variables. Using a Cobb-Douglas market model, we quantitatively assess national and global implications of structural policies on the wheat market, determined by technical progress and other structural policy measures in 2005-2020. With a comparative-static and comparative-dynamic analysis for the European Union (EU-27) and the United States of America (US) (as leading wheat exporting countries), we show that structural policies (e.g. technical progress) on the wheat market in the analyzed countries brings about an increase of the producer surplus; however, it has negative impact on national budgets in the EU-27 and the US, regardless of the implemented price policies. Moreover, structural policies implemented over time contribute to an increase of welfare, producer surplus, and budget expenditures in the analyzed countries. A global effect of national structural policies in the EU-27 and the US is a continuously decreasing world market price of wheat. Structural policies in the analyzed countries bring about global positive effects for the economies of other countries in the world, e.g., growing welfare and consumer surplus, while negative effects for producers in the rest of the world.

Keywords: Structural policy, technical progress, dynamic market effects, wheat market