uted the most to the TRI were (in order): India; Japan; Taiwan, China; Vietnam; the Republic of Korea; China; and the United States. Similar distortion patterns apply to earlier years as well. More recently, Martin and Anderson (2012, p. 426) found that restrictive trade policies during the 2006-08 price spike may explain as much as 45 percent of the increase in the international rice price. They also concluded that trade policies induced a 30 percent increase in wheat prices during the boom years.<sup>**6**</sup> Not only is the global rice market subjected to large distortions, but also such distortions apply to both export and import sides. Timmer and Slayton (2009), for example, discuss how large tenders by the Philippines—a large rice importing country—may have affected rice prices. Examples of countries whose rice marketing and trade is either handled exclusively by STEs or heavily influenced by policies include (but are not limited to) India (Food Corporation), Indonesia (Badan Urusan Logistik or BULOG), the Philippines (National Food Authority), and Thailand (Rice Paddy Pledging Program).

It is often argued that high rice price volatility observed during the past few years is partly due to the thin nature of the export market. Indeed, only 8 percent of global production is traded internationally, the lowest among the commodities examined in this study (table 3). Yet, historically, rice price volatility has been remarkably similar to that of other grains and oilseeds; in fact, during 2010-12, rice and soybean price volatility was the lowest among the five commodities examined here. Furthermore, concentration of the global trade of rice is, again, in line with other commodities. The Herfindahl concentration index for the rice export market is 15 percent, higher than maize (12 percent) but much lower than wheat (21 percent).<sup>**7**</sup> These characteristics suggest that it is policy concentration (not market concentration, market thinness, or price volatility) that matters most in the rice market and distinguishes it from other markets.<sup>**8**</sup>

# Crude Oil

The estimate for oil price elasticity was significantly different from zero in all five regressions—the only highly significant driver across all models (see table 2). It ranged

> **6** In addition to affecting world prices, such distortions may be associated with high domestic costs. For example, Thai rice policies during 2011/12 may have cost as much as 1 percent of Thailand’s total GDP (World Bank 2012a).

> **7** The Herfindahl index of market concentration (used often in the industrial organization literature) is calculated as Σi=1,N _Si_<sup>_2_</sup> , where _Si_ is the export share of country _i_ ; values close to zero indicate low concentration while values exceeding 0.25 (or 25 percent) indicate high concentration—however, when there are close substitutes (as in the case of palm oil, which has many close substitutes such as soybean oil), even an index close to unity may not be consistent with high concentration; same argument applies to market thinness. The upper bound of the index is 1 (100 percent), implying that the industry (global commodity market in our case) is dominated by one firm (country).

> **8** The different nature of the problems relevant to the rice market (compared to other grains) has been highlighted by Gilbert (2012).

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