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Measuring the Impact of Agricultural Production Shocks on International Trade Flows

Shon Ferguson () and Johan Gars ()
Additional contact information
Johan Gars: GEDB, Postal: Royal Swedish Academy of Sciences

No 1227, Working Paper Series from Research Institute of Industrial Economics

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 percent increase in production leading to a 0.5 percent increase in exports. We also find that per-unit trade costs are large, comprising 15 to 20 percent 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)
JEL-codes: F14 F18 Q11 Q17 Q18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-int
Date: 2018-08-28
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Related works:
Working Paper: Measuring the Impact of Agricultural Production Shocks on International Trade Flows (2017) Downloads
Working Paper: Measuring the Impact of Agricultural Production Shocks on International Trade Flows (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1227

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