Wednesday, May 18, 2011

Administered Prices

Administered Prices

An administered price is a price fixed by policy makers in order to determine, directly or indirectly, domestic market or producer prices. In the United States, all administered price schemes set a minimum guaranteed support price or target price for a commodity, which is maintained by associated policy measures such as quantitative restrictions on production and imports; taxes and tariffs on imports; export subsidies; and public stockholding. According to the definitions used, administered prices cover all goods and services whose prices are included in the HICP and are fully (“directly”) set or mainly (“to a significant extent”) influenced by the government (central, regional, or local government including national regulators). Fully administered prices cover the prices of goods and services that are directly set by the government. For example, the government may choose to increase local public transport charges at regular intervals. Other examples may include school and university fees, the prices of public theatre tickets, waste collection and childcare, and fees for administrative documents. Mainly administered prices cover the prices of goods and services on which the government or another national regulator has a very significant influence. These may include, for example, prices that cannot be changed without the prior approval of a national regulatory authority. The influence of such decisions may have a direct bearing on retail prices or it may be indirect via wholesale prices. However, the regulator must have a very significant impact on the consumer price. Owing to the many borderline cases that the concept of administered prices inevitably involves, a number of conventions have been used to guide the implementation of the general definition. Prices that are only influenced by the government via indirect taxation.) are not considered to be administered. Eurostat intends to publish a separate index that excludes the impact of changes in indirect tax rates on the HICP.
For example, administered prices under the 2002 farm bill (P.L. 107-171) include loan rates and/or target prices, and price support levels for sugar, and dairy products.

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