Biased Policies, Agriculture and Income Distribution in South

In this study a Social Accounting Matrix approach is used to analyse the effects of changes in agricultural policies on income distribution. Increasing final demand for agricultural products, and a reduction in agricultural price supports, will produce greater proportional benefits for the poorer households, although these benefits are small. A 6% reduction in agricultural price supports results in a 7% decline in agricultural prices, but the intersectoral effects are concentrated hence the decline in price supports has a relatively limited impact on the structure of relative commodity prices beyond the food system. The benefits of minimum wages in agriculture declines with household incomes, with the higher wages having a limited effect on prices. These policies simulations indicate the extent to which agricultural policy reforms can have a positive effect on the production of other sectors and income distribution in South Africa. Paper prepared for the ESRC Development Economics Study Group Conference on the ‘Role of the Public Sector’, University of Reading, 11 12 July 1997. 1 Scott McDonald gratefully acknowledges the financial support of a research grant from the Department for International Development. Biased Policies, Agriculture and Income Distribution in South Africa