Domestic Trade Frictions and Agriculture
No 641, Working Papers from Research Seminar in International Economics, University of Michigan
Trade costs are a major barrier to efficient farming in developing countries. I study land use patterns and input demand in Peru, a country where goods are traded at a high cost, both domestically and with the rest of the world. I then quantify the equilibrium effect of paving existing roads on productivity and real incomes. To do so, I develop a model of agricultural specialization and trade, and quantify it using a new dataset on Peruvian agriculture, which includes disaggregated information on crop prices, yields and land allocations. While typically raising productivity, paving roads on a large scale creates both winners and losers, depending on whether prices are set in domestic markets, or whether workers are net food buyers. In the simulations, an average farmer gains 14% in productivity and 5% in welfare.
Keywords: assignment models; trade costs; equilibrium; agriculture; productivity (search for similar items in EconPapers)
JEL-codes: F11 F14 (search for similar items in EconPapers)
Pages: 54 pages
New Economics Papers: this item is included in nep-agr and nep-int
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Journal Article: Domestic Trade Frictions and Agriculture (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:641
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