Economic analysis of pricing policies of meat products in Iraq

• Main Author: Hussein, Sarmad Ali
• Format: Thesis
• Language: English
• Published: 2017
• Online Access: http://psasir.upm.edu.my/id/eprint/70509/1/FP%202017%2053%20IR.pdf; http://psasir.upm.edu.my/id/eprint/70509/
• Institution: Universiti Putra Malaysia

Price policy is a tool used to motivate producers to increase production. It aims to balance the interests of producers and consumers, as well as the government. Demand for meat in Iraq has increased significantly over the years. The livestock sector is suffering from higher prices and an increase in costs. There are two (2) approaches to support which can be output price or input price policies. These policies require considerable funds from the government treasury. This study examines the effects of state intervention in the pricing of meat products (beef and fish) in Iraq for the period 1985-2013. It aims to measure protection coefficients to determine whether support is benefit of producers or consumers. Also to determine multiple effects of the single market model for government policy of output price support and input price support. Methodologies used in this study include annual time series data from 1985 to 2013 which were obtained at the national level which are a whole for prices of beef and fish, production and consumption, input prices and local currency exchange rate. The analysis was based on the use of several mathematical formulas that depended on economic theory so called partial equilibrium framework. Results indicated that the net nominal protection coefficients for beef computed based on the shadow exchange rate were greater than one that means beef producers received motivation except for years 1991, 1992, 1994 and 1996 when consumers were protected. While for fish, the values of the nominal protection coefficient do not clearly show whether producers or consumers benefited more from government intervention policy. Consumers of fish benefited during the periods 1987-1999 and 2011-2013 while producers also benefited during the period covered. The results of multi-effects for the single market model are based on a set of criteria. With respect to the change in government revenue, for beef, it is positive for most of the years, implying that the government earned revenue as a result of the subsidy policy except for the years 1991, 1992, 1994 and 1996. For fish, there is indication of a negative change in government revenue which implies lower revenue for the government for the period 1987-1999 as well as 2011-2013 due to the policy support for fish. For the rest of other years, there was a positive change in government revenue for fish. The computed values of the net economic losses in production and consumption reveal the existence of economic loss in both production and consumption of beef and fish. The change in consumer surplus for beef is negative for most of years which mean that there is a decrease in consumer welfare for most of the years with the exception of years 1991, 1992, 1994 and 1996 in which the change in consumer surplus is positive. On the other hand, the change in consumer surplus with respect to fish is positive during the periods 1987-1992, 1994-1999 and 2011-2013, indicating an increase in the welfare of consumers of fish. The change in producer surplus for most of the years is positive in relation to beef, suggesting an increase in the welfare of beef producers while change in producer surplus for fish is negative for most of years of study. In terms of cost of price support for beef, it is negative with respect to the consumer for all years because the unit price paid by consumers of beef was higher than the product price. With respect to fish, it is also negative for the consumer for most of the years. This suggests that, the government gained revenue as a result of the price policy, as the recommended retail price was greater than the purchase price of product. The results show that the government supported the input price for beef and fish production during the study. This is because the price at which these inputs were sold to producers was less than their purchase price. This means that government pricing policy of supporting the inputs for beef and fish benefitted producers for most of the years. In addition, when the government supports input price, it entails a cost which arises as a result of the application of the subsidy program. Comparing the results for beef and fish reveals that government support policy favoured the producers of beef more than consumers. In the case of fish, government price policy did not specifically discriminate one group relative to the other. Overall, the policy of input price support for the production of meat is the preferred policy because it exerts fewer burdens on the government budget. The study recommends that the government should determine the prices of meat in order to incentivize producers to increase domestic production and protect consumers. It is important to pay attention to the equilibrium exchange rate which affects the real values of producer and consumer prices. The current price policy should be redesigned to achieve a delicate balance between the welfare of producers and consumers and ensure efficiency in the use of local resources in the production and consumption of meat. The output price support policy for meat must be consistent with that of the input price support so that the implementation of each of them can be advantageous. The government should give priority to the development of the livestock industry through the development and rehabilitation of projects in order to expand production and achieve food self-sufficiency.