Empirical assessment of agricultural producers’ prices policy in a developing economy

The purpose of this paper is to suggest a methodology for agricultural producers’ prices policies assessment in an open developing economy. The issue is here considered for countries with a “dual” agricultural sector, that is an agricultural sector composed of an industry oriented or export oriented subsector, and of a subsistence subsector producing mainly but not sufficiently for domestic consumption, the domestic demand gap being filled by means of imports. Assuming that decision makers want to stabilize in the long run both the real agricultural income and the real imports of the subsistence product, the unconstrained optimal prices of the two categories of products are derived, using a parsimonious specification of the agricultural income and the imports equations, and a quadratic unweighted loss function incorporating target values of real agricultural income and real agricultural imports. The prices formulas obtained are then used to set up an empirical assessment method of agricultural producers’ prices policies, which is applied to a country with features considered in the theoretical analysis (Senegal).