2020

Measuring the Impact of Agricultural Production Shocks on International Trade Flows

Reprint No. 2020:47

Author(s): Shon Ferguson and Johan GarsYear: 2020 Title: European Review of Agricultural Economics Volume (No.): 47 (3) Pages: 1094–1132
Online article (restrictions may apply)
Preliminary version


The purpose of this study is to measure the sensitivity of traded quantities and trade unit values to agricultural production shocks. We develop a general equilibrium model of trade in which production shocks in exporting countries affect both traded quantities and trade unit values. The model includes per-unit trade costs and develops a methodology to quantify their size exploiting the trade unit value data. Using bilateral trade flow data for a large sample of countries and agricultural commodities, we find that the intensive margin of trade is relatively inelastic to production shocks, with a 1 per cent increase in production leading to a 0.5 per cent increase in exports. We also find that per-unit trade costs are large, comprising 15–20 per cent of import unit values on average. Overall, our results suggest that there is room for improving trade as a mechanism for coping with food production volatility.


Reference:
Ferguson, Johan and Johan Gars (2020), "Measuring the Impact of Agricultural Production Shocks on International Trade Flows". European Review of Agricultural Economics 47(3), 1094–1132.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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