Working Paper: CEPR ID: DP8102
Authors: Kym Anderson; Signe Nelgen
Abstract: National barriers to trade are often varied to insulate domestic markets from international price variability. This paper explores the extent of that behavior by governments using estimates of agricultural price distortions in 75 countries. Newly estimated price transmission elasticities are quite low, albeit slightly higher since than before 1985. In the case of extreme upward price spikes, trade policy responses by food importers are as substantial as those of exporting countries. The domestic price-stabilizing effect of intervention by each group is thereby weakened by the other group?s response, suggesting more-effective domestic policy options need to be considered instead of varying trade barriers.
Keywords: agricultural trade policies; commodity price stabilization; distorted incentives; domestic market insulation; price transmission
JEL Codes: F14; Q17; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sudden export restrictions by food-exporting countries (F14) | international price spikes (P22) |
| international price spikes (P22) | complications in stabilization efforts of food-importing countries (F35) |
| trade policy responses by food importers (F13) | weakening of domestic price stabilization efforts (E64) |
| trade policy responses by food exporters (F14) | weakening of domestic price stabilization efforts (E64) |
| trade interventions intended to stabilize prices (F13) | increased volatility and welfare transfers from food-deficit to food-surplus countries (F16) |
| trade measures aimed at protecting consumers from price spikes (D18) | harm to producers in developing countries (F69) |
| trade measures aimed at protecting consumers from price spikes (D18) | increased poverty levels (I32) |