Measuring the impact of agricultural production shocks on international trade flows

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

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