Measuring the impact of agricultural production shocks on international trade flows

Shon Ferguson () and Johan Gars

European Review of Agricultural Economics, 2020, vol. 47, issue 3, 1094-1132

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 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Measuring the Impact of Agricultural Production Shocks on International Trade Flows (2018)
Working Paper: Measuring the Impact of Agricultural Production Shocks on International Trade Flows (2017)
Working Paper: Measuring the Impact of Agricultural Production Shocks on International Trade Flows (2017)
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