This study is an analysis of the substitution effects that are likely to be induced by the increase in the government purchase prices of different grains of the 1974 autumnal harvest.
The underlying assumptions are as follows: The government purchase price of rice harvested in 1974 was raised 38.5 percent from the previous year, while the government release price was determined by multiplying the government purchase price by 0.07 (for operating expenses), and was intended to maintain the balance of the Special Account. These assumptions led to the conclusion that the consumption of rice, barley, and flour would increase by 230,000 metric tons, 165,000 metric tons, and 51,000 metric tons, respectively, between 1972 and 1975. If we apply an annual cost amplitude of 13 percent, the consumptions of rice, barley, and flour would also increase by 169,000 metric tons, 243,000 metric tons, and 160,000 metric tons, respectively.
What if the Korean government were to stop subsidizing the cost of flour? In this case, we may readjust the price of flour to the international price for raw wheat, around USD 200 per metric ton at present. In this scenario, the readjusted price of flour would increase the rice consumption by at least 231,000 metric tons, and the barley consumption by 307,000 metric tons. Flour consumption would drop by 144,000 metric tons at least.
Finally, assuming that the quantity of inventory grain held as of the end of 1974 would remain the same as of the end of 1975, we may estimate how grain consumption would pan out in these two years. Once again applying the government release prices (seven percent over the purchase price) and assuming an annual cost amplitude of 13 percent and no subsidies for the purchase of flour, there would be a grain shortage ranging between 114,000 metric tons and 176,000 metric tons.
1974년산 추곡매입가격인상과 곡종간 소비대체 효과 분석(Increase in the government purchase prices of autumnal harvest grains of 1974 and the likely substitution effect)
[서울] : 한국개발연구원
|Series Title; No||정책연구시리즈 / 74-8|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics
Industry and Technology < Agriculture
|Holding||KDI; KDI School|