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Crop Failures and Export Tariffs

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  • Pio Baake
  • Steffen Huck

Abstract

We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.433531.de/dp1342.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1342.

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Length: 28 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwwpp:dp1342

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Keywords: Grain markets; food prices; export tariffs; oligopoly and oligopsony;

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  1. David S. Jacks, Kevin H. O'Rourke and Jeffrey G. Williamson, 2009. "Commodity Price Volatility and World Market Integration since 1700," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp284, IIIS.
  2. Anderson, Kym & Rausser, Gordon & Swinnen, Johan, 2012. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9221, C.E.P.R. Discussion Papers.
  3. Anderson, Kym & Nelgen, Signe, 2012. "Trade Barrier Volatility and Agricultural Price Stabilization," World Development, Elsevier, Elsevier, vol. 40(1), pages 36-48.
  4. Reza Oladi & John Gilbert, 2012. "Buyer and Seller Concentration in Global Commodity Markets," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 16(2), pages 359-367, 05.
  5. Antoine Bouët & David Laborde Debucquet, 2012. "Food crisis and export taxation: the cost of non-cooperative trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 148(1), pages 209-233, April.
  6. "Edward" Yu, Tun-Hsiang & Tokgoz, Simla & Wailes, Eric & Chavez, Eddie, 2011. "A quantitative analysis of trade policy responses to higher world agricultural commodity prices," Food Policy, Elsevier, Elsevier, vol. 36(5), pages 545-561, October.
  7. Bellemare, Marc F., 2011. "Rising food prices, food price volatility, and political unrest," MPRA Paper 31888, University Library of Munich, Germany.
  8. Alan V. Deardorff & Indira Rajaraman, 2009. "Buyer Concentration in Markets for Developing Country Exports," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 13(2), pages 190-199, 05.
  9. von Braun, Joachim & Tadesse, Getaw, 2012. "Global Food Price Volatility and Spikes: An Overview of Costs, Causes, and Solutions," Discussion Papers, University of Bonn, Center for Development Research (ZEF) 120021, University of Bonn, Center for Development Research (ZEF).
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