Working Paper: CEPR ID: DP7787
Authors: Kishore Gawande; Bernard Hoekman
Abstract: This paper empirically explores the political-economic determinants of why governments choose to tax or subsidize trade in agriculture. We use a new data set on nominal rates of assistance (NRA) across a number of commodities spanning the last four decades for 64 countries. NRAs measure the effect on domestic (relative to world) price of the scala of quantitative and price-based instruments used to regulate agriculture The data set admits consideration of effective taxes and subsidies on exports and imports. We find that both economic and political variables play important roles in determining the within-variation in the NRA data. Based on our results we offer a number of data-driven exploratory hypotheses that can inform future theoretical and empirical research on why governments choose to tax or subsidize agricultural products ? an important policy question that is also one of the least understood by scholars.
Keywords: agriculture; political economy; trade policy
JEL Codes: F13; F14; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher percentage of arable land (Q15) | increased probability of taxing exports (F10) |
| greater proportion of the rural population (R29) | higher likelihood of taxing exports (F10) |
| higher rural population density (R23) | increased probability of export subsidization (F14) |
| larger majority in the legislature (D72) | more likely to subsidize exports (F14) |
| stronger electoral competition (D72) | policies that favor export subsidization (F13) |