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.

Policymakers often intervene in markets to protect domestic producers against foreign competitors. Two such interventions are import tariffs and production subsidies, both of which are, in general, costly. In this paper, we study the relative magnitudes of these costs in the context of the Indian utility-scale solar sector. The Indian government, in recent years, has relied on both import tariffs and production subsidies to support the domestic solar module manufacturing industry. Using a structural model of the solar panel/module industry and its downstream counterpart – the solar power plant industry, we quantify the short-run costs of expanding the size and share of domestic solar module manufacturing using tariffs and subsidies. We find small net costs associated with production subsidies and much larger costs associated with import tariffs. Specifically, in our main counterfactual, we find that expanding domestic output using just import tariffs reduces welfare by 46% relative to baseline, while doing so using just production subsidies reduces welfare by less than 1%.

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.