Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/183456 
Year of Publication: 
2018
Series/Report no.: 
IFN Working Paper No. 1227
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
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 percent increase in production leading to a 0.5 percent increase in exports. We also find that per-unit trade costs are large, comprising 15 to 20 percent of import unit val- ues on average. Overall, our results suggest that there is room for improving trade as a mechanism for coping with food production volatility.
Subjects: 
Food production volatility
Trade costs
Agricultural trade
Gravity model
JEL: 
F14
F18
Q11
Q17
Q18
Document Type: 
Working Paper

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