Trade Risk and Food Security

Tasso Adamopoulos and Fernando Leibovici

No 2024-004, Working Papers from Federal Reserve Bank of St. Louis

Abstract: International trade provides critical access to food, yet many food-importing countries protect agriculture even where productivity is low. We study how the risk of trade disruptions shapes food security, the global distribution of production, and optimal policy. We document that reliance on imported staples is linked to higher food insecurity, particularly in poorer countries. Exploiting the Ukraine–Russia war, we find that districts in Ethiopia more exposed to disrupted imports suffered sharper declines in food security. We develop a multi-sector model of trade with stochastic trade costs and non-homothetic preferences. Uncertainty over trade costs induces a risk–return trade-off in sourcing, leading importers to reallocate toward domestic production or more reliable partners. Quantitatively, food importers retreat most from trade, reallocate resources to agriculture, and face higher food insecurity. We analytically characterize and quantify optimal agricultural protection as insurance that fosters resilience to trade disruptions. Productivity growth can substitute for protection by reducing exposure to risk.

Keywords: food security; trade; risk; structural change; productivity; trade policy (search for similar items in EconPapers)
JEL-codes: E10 F10 F60 I30 O11 O41 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2024-02, Revised 2025-11-05
New Economics Papers: this item is included in nep-agr, nep-cis, nep-int, nep-inv, nep-mac and nep-tra
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DOI: 10.20955/wp.2024.004

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