AbstractThe implications of Thai government taxation of rice exports through the export premium on trade and welfare are examined by means of a dynamic simultaneous equation model which allows for interactions between the rice production, consumption, and export sectors. Although the export premium may have generated a net welfare gain for Thailand over the 1961–70 period, owing to the highly imperfect nature of the international market, it results in a substantial transfer from the farmers and may have adverse effects on their incentives to adopt modern inputs in paddy production.