Evaluation of agricultural support in the Republic of Moldova

Abstract

This paper presents the outcome of the study conducted by the Food and Agriculture Organization of the United Nations in collaboration with the National Institute for Economic Research in the Republic of Moldova. The paper assesses the level and structure of government support to agriculture in Moldova by using a combination of formal quantitative, informal quantitative and qualitative analysis. Application of the PSE methodology by OECD provides a standardized quantitative method of measurement of support to agricultural sector. The methodology is based on comparing output producers’ prices (farm gate prices) with prices expected without policy interventions, e.g. market equilibrium or reference prices. Reference price must be selected in a way that best represents the opportunity costs of producing the commodity domestically. The effect of the public policy is measured by the difference between market and reference prices. If the difference between market and reference output prices is positive, policy causes benefits to producers, and if negative – policy leads to implicit taxation of the farmers. The paper suggests strategies and policy actions in order to increase efficiency of public support to agriculture with the focus on export growth.