Working Paper: CEPR ID: DP9555
Authors: Kym Anderson; Maros Ivanic; Will Martin
Abstract: This paper has two purposes. It first considers the impact on world food prices of the changes in restrictions on trade in staple foods during the 2008 world food price crisis. Those changes?reductions in import protection or increases in export restraints?were meant to partially insulate domestic markets from the spike in international prices. We find that this insulation added substantially to the spike in international prices for rice, wheat, maize and oilseeds. As a result, while domestic prices rose less than they would have without insulation in some developing countries, in many other countries they rose more than in the absence of such insulation. The paper?s second purpose it to estimate the combined impact of such insulating behavior on poverty in various developing countries and globally. We find that the actual poverty-reducing impact of insulation is much less than its apparent impact, and that its net effect was to increase global poverty in 2008 by 8 million, although this increase was not significantly different from zero. Since there are domestic policy instruments such as conditional cash transfers that could now provide social protection for the poor far more efficiently and equitably than variations in border restrictions, we suggest it is time to seek a multilateral agreement to desist from changing restrictions on trade when international food prices spike.
Keywords: commodity price stabilization; domestic market insulation; international price transmission; loss aversion
JEL Codes: F14; O24; Q17; Q18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| changes in trade restrictions during the 2008 world food price crisis (F14) | international food prices (Q11) |
| insulation measures (L74) | international prices for rice, wheat, maize, and oilseeds (Q11) |
| insulation (L74) | domestic price increases in some developing countries (P22) |
| insulation (L74) | greater increases in domestic prices in many countries than without insulation (F69) |
| insulating behavior (C92) | global poverty in 2008 (I32) |
| apparent poverty-reducing impact of insulation (H53) | net increase in poverty (I32) |
| individual country responses to price spikes (P22) | collective alleviation of poverty (I32) |