subsidy) and an export subsidy (or tax).<sup>20</sup> These measures, in turn, reinforce the original shock to world prices. The data used for quantifying the extent of trade policy interventions are taken primarily from the Ag-Incentives Consortium database reflecting changes in domestic and world prices for 57 countries and 68 agricultural and food commodities during 2005-2015.<sup>21</sup> Where data from the Ag-Incentives database were unavailable, alternative data were used from FAOSTAT, GIEWS and Fewsnet. Overall, this analysis covers 24 major food producing and consuming countries, using data on household income sources and spending patterns from 2011. Of these, 18 are EMDEs and 6 are LICs.

**Impact of policy interventions on global prices.** During the food price spike of 2010-11, world prices of maize, wheat and rice rose by 44, 39, and 6 percent, respectively, but domestic prices considerably less (Figure 4). Model results suggest that the combined action of government policies amplified global wheat and maize price increases, accounting for about 40 percent of the increase in world price of wheat and one-quarter of the increase in the price of maize. In contrast, combined policy action reduced the rice price surge compared to a non-action scenario.<sup>22</sup>

_Rice._ Some countries (e.g., Bangladesh, Nepal, Panama, Tanzania and Zambia) reduced trade barriers to partially offset the rise in world rice prices. However, important net rice exporters such as India, Pakistan, and Yemen implemented policy interventions that, ultimately, raised domestic rice prices more than the increase in world prices. In India, the world’s second-largest rice producer, quantitative restrictions imposed in 2007 initially prevented domestic price increases. However, the subsequent abolition of export quotas in September 2011 resulted in a surge in exports and a rise in domestic prices. In Pakistan, summer that affected of the land area and heavy flooding one-fifth country’s inflicted extensive damage to crops raised domestic rice prices relative to the world price over the same period. A large increase in domestic prices relative to external prices occurred in Yemen, amid persistent water shortages and a shift to less water-intensive non-staple

> 20Many countries typically put in place flanking policies. In 2007-08, for example, Indonesia subsidized imports of wheat and rice, respectively, to hold down domestic consumer prices. To avoid subsidizing exports of the same goods, export restrictions were also introduced. Because rice, wheat, and maize are bulk commodities that are less strongly differentiated than manufactured products, two-way trade in these goods is unusual—except when there are regional differences in varieties (for example, Indian exports of Basmati rice and imports of Jasmine rice). Models of differentiated products are needed to adequately capture actual bilateral trade flows in these commodities (Thursby, Johnson, and Grennes 1986).

21The data is available at www.ag-incentives.org.

22This primarily reflects the elimination of export restrictions in India and the increased import protection in Pakistan, Indonesia, Uganda, and Yemen.

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