The effects of direct storage subsidies under limited rationality: a general equilibrium analysis

We study here the effects of a public subsidy to private storage set up at world level. To simulate the welfare effects and impacts on market fluctuations of this subsidy, we use a dynamic Computable General Equilibrium model assuming imperfect expectations. We also perform different statistical analysis based on our CGE results and show that the storage subsidy can have the undesired effect of destabilizing agricultural markets, depending on the form of economic agents’ price expectations and on the structure of the shocks impacting the agricultural production.