How do government programs that distort prices in agricultural markets affect producers and consumers along the income distribution? We study the distributional effects of three such programs in Indian agricultural markets: fertilizer subsidies, procurement of crops at minimum support prices (MSP), and sale of subsidized grains to households. These interventions directly impact hundreds of millions of people and cost about 1.2% of India’s GDP. To examine their effects, we estimate a structural model of supply and demand with heterogeneous risk-averse producers, who choose a portfolio of crops and crop-specific inputs, and heterogeneous households who make consumption decisions. Using the estimated structural parameters, we solve for counterfactual equilibria in which these interventions are phased out. On the demand-side, we find these programs to be progressive. In their absence, consumption and expenditures of lower-income households would be affected more adversely. On the supply-side, we find these programs to be (weakly) regressive. Higher fertilizer prices, in the absence of subsidies, would be compensated by higher output prices so impact on farmer welfare would be minimal. Under no government-procurement at MSP, richer farmers would experience a greater welfare loss, while some of the poorest farmers would gain – a result driven partly by the inequitable implementation of the procurement program.

How do import tariffs and production subsidies, aimed at supporting a domestic industry, perform in settings with oligopolistic markets? We study this question in the context of India’s utility-scale solar sector, which comprises two connected industries: an upstream industry that produces solar panels and a downstream industry that develops solar power plants. In recent years, the Indian government has relied on both import tariffs and production subsidies to support domestic producers in the upstream solar panel industry. To empirically examine the effects of these policies, we develop a structural model of the solar sector and estimate it using data from these two industries. We derive optimal policies for three scenarios – only tariffs, only subsidies, or a mix of the two – which expand upstream domestic output to a given target level. Depending on the intended magnitude of expansion, both tariffs and subsidies can improve welfare relative to no intervention. But neither dominates the other at all levels of the target, and for a range of expansion goals, a mix of both policies yields the greatest welfare gains for the sector.

Price controls continue to be a popular policy tool in developing countries to regulate output prices in various industries. Understanding how these interventions affect industry dynamics, and thus the long-run equilibrium, is especially important in the context of developing countries where industries may be undergoing rapid growth. In this paper, we study the impact of price controls in the Indian cement industry, which was subject to regulated prices until the 1980s when the industry was gradually liberalized. Using plant-level data from 1970 to 2000, we build a dynamic oligopoly model with non-stationary firm dynamics to analyze how production, investment, and consumer welfare differed under the price control and free market regimes. We also use the model to examine the welfare implications of different transition paths from price controls to a free market, and provide guidance for optimal transition policies for policymakers considering liberalization of an industry.