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Price Responsiveness of World Grain Markets: The Influence of Government Intervention on Import Price Elasticity

Author

Listed:
  • Roe, Terry
  • Shane, Mathew
  • Vo, De Huu

Abstract

Intervention by governments in their foreign trade sectors fundamentally alters the character and composition of agricultural trade by making imports less responsive to international price changes than they otherwise would be. Intervention can also make world market prices change more frequently and more drastically. The authors developed a model of government intervention and applied it to the international wheat and rice markets using combined cross-country and time-series data. Using an estimated import equation, they measured the responsiveness of import demand and excess demand to price changes and the extent to which price changes are transmitted to final consumers. Based on this study, the authors concluded that governments reduced the degree of intervention between 1967 and 1980 and that U.S. agriculture is in a good position to benefit from relaxed trade restrictions. Also, increased per capita income does not necessarily increase demand for imported goods; rather, increased per capita export revenues generate the basis for increased purchases of imports.

Suggested Citation

  • Roe, Terry & Shane, Mathew & Vo, De Huu, 1986. "Price Responsiveness of World Grain Markets: The Influence of Government Intervention on Import Price Elasticity," Technical Bulletins 157021, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerstb:157021
    DOI: 10.22004/ag.econ.157021
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    References listed on IDEAS

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    1. Willis L. Peterson, 1979. "International Farm Prices and the Social Cost of Cheap Food Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(1), pages 12-21.
    2. Abbott, Philip C., 1984. "Foreign Exchange Constraints to Trade and Development," Foreign Agricultural Economic Report (FAER) 147529, United States Department of Agriculture, Economic Research Service.
    3. Tweeten, Luther G., 1967. "The Demand for United States Farm Output," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 7(3), pages 1-28.
    4. Philip C. Abbott, 1979. "Modeling International Grain Trade with Government Controlled Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(1), pages 22-31.
    5. Paul R. Johnson, 1977. "The Elasticity of Foreign Demand for U.S. Agricultural Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(4), pages 735-736.
    6. Gerrard, Christopher D. & Roe, Terry, 1983. "Government intervention in food grain markets : An econometric study of Tanzania," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 109-132.
    7. Maury E. Bredahl & William H. Meyers & Keith J. Collins, 1979. "The Elasticity of Foreign Demand for U.S. Agricultural Products: The Importance of the Price Transmission Elasticity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(1), pages 58-63.
    8. Alexander H. Sarris & John Freebairn, 1983. "Endogenous Price Policies and International Wheat Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 214-224.
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    Citations

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    Cited by:

    1. Lopez, Rigoberto A., 1990. "Economic Surpluses In The U.S. Sugar Market," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 19(1), pages 1-9, April.
    2. Timms, Dan & Shane, Mathew, 1987. "World Agricultural Trade Shares, 1962-85," Statistical Bulletin 154648, United States Department of Agriculture, Economic Research Service.
    3. Barry K. Goodwin & Ted C. Schroeder, 1991. "Price Dynamics in International Wheat Markets," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(2), pages 237-254, July.
    4. Shane, Mathew, 1986. "Trade and Development, Development and Trade," 1986: Trade and Development Meeting, December 1986, CIMMYT, Mexico City, Mexico 50663, International Agricultural Trade Research Consortium.
    5. Gehlhar, Mark J. & Dohlman, Erik & Brooks, Nora L. & Jerardo, Alberto & Vollrath, Thomas L., 2007. "Global Growth, Macroeconomic Change, and U.S. Agricultural Trade," Economic Research Report 55963, United States Department of Agriculture, Economic Research Service.
    6. Hiemstra, Stephen W. & Shane, Mathew, 1988. "Monetary Factors Influencing GATT Negotiations on Agriculture," Foreign Agricultural Economic Report (FAER) 147990, United States Department of Agriculture, Economic Research Service.
    7. Lopez, Rigoberto A., 1988. "Political Economy of the United States Sugar Policies," Working Papers 115808, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    8. Doroodian, Khosrow & Boyd, Roy, 1995. "The Effectiveness of Export Promotion Policies in a General Equilibrium Framework: The Case of the Philippines," Philippine Journal of Development JPD 1995 Vol. XXII No. 2-, Philippine Institute for Development Studies.
    9. Baxter, Timothy M. & Smith, Mark E., 1987. "Exchange Rate Risk, Dollar Appreciation, And U.S. Export Credit Programs," Staff Reports 277944, United States Department of Agriculture, Economic Research Service.
    10. Sullivan, John, 1990. "Price Transmission Elasticities in the Trade Liberalization (TLIB) Database," Staff Reports 278327, United States Department of Agriculture, Economic Research Service.
    11. Roe, Terry L. & Shane, Mathew, 1986. "Government in the Process of Trade and Development," 1986: Trade and Development Meeting, December 1986, CIMMYT, Mexico City, Mexico 50653, International Agricultural Trade Research Consortium.

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