DP98 | Commodity Market Stabilisation and `North-South' Income Transfers: An Empirical Investigation

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Commodity stabilisation agreements have often been suggested as a means of stabilising producers' revenues and redistributing productive resources to less developed economies (from "North" to "South"). But no empirical estimates of how much may be expected from such agreements, nor of what they would cost to operate, have appeared. This paper examines, in the context of one market, how far prices can be stabilised by buffer stock interventions, the costs of that stabilisation, and whether any redistribution would be achieved. We find pure stabilisation leads to transfers away from the South, but that supply restrictions which force redistribution are extremely expensive. However it is relatively cheap to protect producers in the South against the uncertainty of future revenues.