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

Chia Chiun Ko and Paul Frijters
Additional contact information
Chia Chiun Ko: University of Queensland

No 7988, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: competition; import restrictions; exogenous shocks; instrumental variables; surplus (search for similar items in EconPapers)
JEL-codes: C26 D61 L2 Q17 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-02
New Economics Papers: this item is included in nep-agr, nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://docs.iza.org/dp7988.pdf (application/pdf)

Related works:
Working Paper: When Banana Import Restrictions Lead to Exports: A Tale of Cyclones and Quarantine Policies (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp7988

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().