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Rain, food and tariffs

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Author Info

  • Paulo Bastos

    ()
    (Research Department, Inter-American Development Bank, United States)

  • Odd Rune Straume

    ()
    (Department of Economics, University of Minho)

  • Jaime A. Urrego

    ()
    (Research Department, Inter-American Development Bank, United States)

Abstract

We examine whether and how rainfall shocks affect tariff setting in the agricultural sector. In a model of international oligopoly, we show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous, depending on the weight placed by the domestic policy maker on tariff revenue, profi ts and the consumer surplus. The more weight placed on domestic profits ts, the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs. Using detailed panel data on applied tariffs and rainfall for 70 nations, we fi nd that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 06/2012.

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Date of creation: 2012
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Handle: RePEc:nip:nipewp:06/2012

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
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Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
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Keywords: Rainfall shocks; strategic trade policy; agriculture.;

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  1. Sharon L. Maccini & Dean Yang, 2008. "Under the Weather: Health, Schooling, and Economic Consequences of Early-Life Rainfall," NBER Working Papers 14031, National Bureau of Economic Research, Inc.
  2. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  3. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  4. Olivier Desch�nes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
  5. Grossman, Gene M. & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Scholarly Articles 3450062, Harvard University Department of Economics.
  6. Markus Brückner & Antonio Ciccone, 2008. "Rain and the democratic window of opportunity," Economics Working Papers 1114, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2009.
  7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  8. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  9. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
  10. Gibson, Paul R. & Wainio, John & Whitley, Daniel B. & Bohman, Mary, 2001. "Profiles Of Tariffs In Global Agricultural Markets," Agricultural Economics Reports 34055, United States Department of Agriculture, Economic Research Service.
  11. Kyle Bagwell & Robert W. Staiger, 2009. "The Economics of Trade Agreements in the Linear Cournot Delocation Model," NBER Working Papers 15492, National Bureau of Economic Research, Inc.
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