The sensitivity of trade flows to trade barriers

This study analyzes the sensitivity of trade flows to trade barriers from gravity equations, using different econometric techniques recently highlighted in the literature. Specifically, we compare a benchmark OLS fixed effects specification a la Feenstra (2002) with three emerging estimation methods: the standard Heckman correction for selection bias, to account for zero trade flows; the Eaton and Tamura (1994) Tobit estimator, to solve limited-dependent variable issues; and, finally, the Poisson pseudo-maximum-likelihood (PPML) technique, to correct for the presence of heteroskedasticity. Our gravity model includes trade among 193 exporter and 99 importer countries, in 18 food industry sectors. The paper achieves two goals: First it provides estimates of the elasticity of substitution obtained using the four estimation techniques; Second, it gives a dimension to the trade reduction effect induced by existing border protection, by simulating the effect of a full trade liberalization scenario on 18 food sectors. The estimates reveal interesting variations in the elasticity of substitution across products and procedures. The simulation indicates that trade liberalization will strongly increase food exports, especially from emerging and developing countries.Gravity model, Food Trade, Substitution elasticity, Trade liberalization, International Relations/Trade, F1, F13, F14,

Market Access Asymmetry in Food Trade among Quad Countries

This paper uses a gravity-like structure derived from a monopolistic competition model to measure market access among Canada, USA, Japan and EU Quad countries over the 1996-2001 period. We explore the overall asymmetry and 18 food industrial-level asymmetries of bilateral trade openness. Using actual bilateral estimates of tariffs and nontariff barriers, we investigate their role in explaining the trade reduction effect of national borders. A representative estimate of market access shows that higher asymmetries exist in USA, Canada and EU trade with Japan. Quite surprisingly, the last country is always more open than the reverse. Finally, we found that tariffs and NTBs explain a significant part of the border effects and that the NTB role is often higher than that of tariff.market access, food trade, asymmetry, gravity, QUAD countries, International Relations/Trade, F13, F14, Q17,

Explaining National Border Effects in the Quad Food Trade

Starting from a theoretically consistent gravity model, this paper first provides estimates of bilateral 'border effects' in food trade among Quad countries (Canada, USA, Japan and EU) at the ISIC 4-digit level. Then, it investigates the underlying reasons of border effect, assessing the role played by policy barriers (tariffs and non-tariff barriers) with respect to barriers unrelated to trade policy, such as information related costs and cultural proximity. In contrast with several previous findings, we show that policy barriers are part of the story in explaining the strong trade reduction effect induced by national borders, and this is especially true when we control for the endogeneity of trade policy to imports, as suggested by political economy arguments. Moreover, our results show that elements linked to cultural proximity and consumer preference for home goods, matter a great deal in explaining the magnitude of border effects. The trade reduction effect induced by these policy-unrelated components are from 1.5 to 3 times larger than that induced by policy barriers. These results have implications for the economic and welfare significance of national borders.border effect, food trade, market access, gravity, QUAD countries, International Relations/Trade, F13, F14, Q17,

The border effect in agricultural markets between European Union, OECD and LDC countries

border effect, gravity equation, agricultural trade, European Union, LDCs, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17,

Mass media and public policy: global evidence from agricultural policies.

Mass media plays a crucial role in information distribution and thus in the political market and public policy making. Theory predicts that information provided by mass media reflects the media’s incentives to provide news to different types of groups in society, and affects these groups’ influence in policy-making. We use data on agricultural policy from 60 countries, spanning a wide range of development stages and media markets, to test these predictions. We find that, in line with theoretical predictions, public support to agriculture is strongly affected by the structure of the mass media. In particular, a greater role of the private mass media in society is associated with policies which benefit the majority more: it reduces taxation of agriculture in poor countries and reduces subsidization of agriculture in rich countries, ceteris paribus. The evidence is also consistent with the hypothesis that increased competition in commercial media reduces transfers to special interest groups and contributes to more efficient public policies.

Constitutional Rules and Agricultural Policy Outcomes

This paper deals with the effect of constitutional rules on agricultural policy outcomes in a panel of observations for more than 70 developing and developed countries in the 1955-2005 period. Testable hypotheses are drawn from recent developments in the comparative politics literature that see political institutions as key elements in shaping public policies. Using differences-in-differences regressions we find a positive effect of a transition into democracy on agricultural protection. However, this average effect masks substantial heterogeneities across different forms of democracy. Indeed, what matters are transitions to proportional (as opposed to majoritarian) democracies, as well as to permanent (as opposed to temporary) democracies. Moreover, while we do not detect significant differences across alternative forms of government (presidential versus parliamentary systems), there is some evidence that the effect of proportional election is exacerbated under parliamentary regimes, and diminished under presidential ones.Distorted incentives, agricultural and trade policy reforms, national agricultural development, Comparative Political Economics, Agricultural Distortions, Constitutional Rules, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, D72, H23, O13, P16,

Elasticity of trade flow to trade barriers: A comparison among emerging estimation techniques

The objective of this study has been to analyze the sensitivity of trade flow to trade barriers from gravity equations, using different econometric techniques recently highlighted in the literature. Specifically, we compare a benchmark OLS fixed effects specification a la Feenstra (2002), with three emerging estimation methods: the standard Heckman correction for selection bias, to account for zero trade flow; its extension, recently proposed by Helpman et al. (2008), to control for firm heterogeneity; and, finally, the Poisson pseudo-maximum-likelihood (PPML) technique to correct for the presence of heteroskedasticity, first proposed by Santos Silva and Tenreyro (2006). Our gravity model includes trade among 211 exporter and 104 importer countries, in 18 food industry sectors.Gravity model, Trade Elasticity, Food trade, International Relations/Trade,

Political competition and support for agriculture

This paper investigates whether political competition plays an important role in determining the level of agricultural protection. In order to do so, we exploit variation in political and economic data from 74 developing and developed countries for the post-war period. Our results robustly show that the level of agricultural distortions is the higher, the higher is the level of political competition. We show that political competition may importantly complement other institutional aspects in determining policy choices. We investigate the heterogeneous effects of political competition across different electoral rules (majoritarian vs. proportional), forms of government (coalition vs. single-party) and level of incomes. --Political competition,constitutional rules,agricultural distortions

The Political Economy of EU Agri-environmental measures: An empirical Assessment at the Regional Level

The paper deals with the political economy determinants of EU agri-environmental measures (AEMs) applied by 59 regional/country units, during the 2001-2004 period. Five different groups of determinants, spanning from positive and negative externalities to political institutions, are highlighted and tested using an econometric model. The main results suggest that AEMs implementation is mostly affected by the strength of farm lobbies, political institutions and the demand for positive externalities. On the contrary, AEMs do not seem implemented by the willingness to address negative externalities.Agri-environmental Measures, Political Economy, EU Regions, Environmental Economics and Policy,

The political economy of policy instrument choice: theory and evidence from agricultural policies.

We study the political economy of instrument choice in agricultural and food policies. After a review of the historical evolution of European agricultural price and trade policy instruments since 1880, we develop a political economy model of instrument choice. The key predictions of the model suggest a rational explanation of instrument choice patterns, based on the trade-off between the different cost components of the policies, and internal and external political constraints. An empirical analysis supports the main predictions of the theoretical model. We find that the GATT/WTO agreement had a significant impact.Political Economy; Instrument Choice; Agricultural Policy, GATT, WTO;