When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies

Chia Chiun Ko and Paul Frijters
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Chia Chiun Ko: School of Economics, The University of Queensland, https://economics.uq.edu.au

No 502, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper examines the welfare loss of import restrictions on bananas in Australia and whether the import restrictions have turned into a particular form of export promotion. We set up a model in which there is free domestic entry, with banana producers accepting losses in normal years, off-set by large profits in years when cyclones destroy a large proportion of the banana plants because of sufficiently low elasticity of demand. Using the cyclones of 2006 and 2011 as exogenous events, we identify the elasticity of demand for bananas in Australia to be around -0.5. We indeed find limited evidence for an ‘over-shooting’ in terms of the supply response after these cyclones, leading to positive exports years after cyclones have hit and re-planted banana plants have become productive. Combining the elasticity estimates with information on turnover, we get an estimated welfare loss of 600 million dollars per year due to banana import restrictions.

Date: 2014-02-13
New Economics Papers: this item is included in nep-agr and nep-int
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https://economics.uq.edu.au/files/45895/502.pdf (application/pdf)

Related works:
Working Paper: When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:502

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