The objective of this study is to analyse the welfare implications of increasing
prices of wheat, maize and rice, and agricultural subsidies on household
welfare in the former Yugoslav Republic of Macedonia. Based on this
analysis, we propose a redesign of the subsidy programme for these crops,
which might help to improve the welfare of households. The results suggest
that the effects of increased commodity prices and the current subsidy
programme were positive only for male-headed rural households. The
newly proposed disbursement scheme for government subsidies is therefore
based on targeting female-headed rural households for both wheat
and rice, all poor urban households for wheat, and male-headed rural
households for rice. Results of the simulation with regard to wheat-maize
production suggest that targeting poor urban households could result in
a significant welfare effect ranging up to 30–40 per cent of the income of
this group of households, assuming it is accompanied by a usufruct of
state-owned land and start-off grants for initial investment. Targeting poor
female-headed rural households may increase the impact of the scheme
from almost zero to about two-thirds of the income of poor male-headed
rural households. The effect on the welfare of poor rural rice producers
may also be large – up to 20 per cent of household income – taking
into account that a considerable effort is however needed to start off rice
production.