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

• Ferguson, Shon

  • Department of Economics, Swedish University of Agricultural Sciences
    
  • Research Institute of Industrial Economics

Sustainable Development Goals

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