Ferguson, Shon
- Department of Economics, Swedish University of Agricultural Sciences
- Research Institute of Industrial Economics
Abstract
The purpose of this study is to measure the sensitivity of traded quantities and trade unit values to agricultural production shocks. We develop a general equilibrium model of trade in which production shocks in exporting countries affect both traded quantities and trade unit values. The model includes per-unit trade costs and develops a methodology to quantify their size exploiting the trade unit value data. Using bilateral trade flow data for a large sample of countries and agricultural commodities, we find that the intensive margin of trade is relatively inelastic to production shocks, with a 1 per cent increase in production leading to a 0.5 per cent increase in exports. We also find that per-unit trade costs are large, comprising 15-20 per cent of import unit values on average. Overall, our results suggest that there is room for improving trade as a mechanism for coping with food production volatility.
Keywords
food production volatility; trade costs; agricultural trade; gravity model
Published in
European Review of Agricultural Economics
2020, volume: 47, number: 3, pages: 1094-1132
SLU Authors
Global goals (SDG)
SDG2 Zero hunger
SDG17 Partnerships for the goals
UKÄ Subject classification
Economics
Publication identifier
- DOI: https://doi.org/10.1093/erae/jbz013
Permanent link to this page (URI)
https://res.slu.se/id/publ/101560