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Distribution Effects of Agricultural Protection in South Korea
Moon, Pal Yong 建國大學校 經濟經營硏究所 1992 商經硏究 Vol.17 No.1
Overall, agricultural pricing policy per se resulted in modest size of financial flow from nonagricultural to agricultural sector throughout 1962∼89 period, but trade and exchange rate policy more than offset the effect of price policy and effected a resource flow in reverse direction in the 1960s. For other years through 1989, the resource flow into the agricultural sector far exceeded the flow out of agriculture, mainly because of intensive price supports. As for the effects on income distribution, the agricultural price support programs have tended to provide benefits primarily for larger farms and to upper income urban consumers. Conversely, a very large number of small farmers and urban lower income earners were helped relatively little by price supports. As the Korean economy continues to grow, however, product lines will become increasingly diversified, and the pattern of consumption will undergo a substantial change. As the variety and volume of nonagricultural goods in the domestic market increase, the relative share of food in household expenditure falls. The average share of food in the cost of living was 42.5 percent in 1975, but it declined to 22.6 percent in 1989. It is expected to decline further as real incomes grows. Consequently, the distributional impact of agricultural price support policy on urban wage earners will be much smaller than it is on farm producers.