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A Gravity approach to evaluate the significance of trade liberalization in vertically-related goods in the presence of non-tariff barriers

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  • Ghazalian, Pascal
  • Tamini, Lota
  • Larue, Bruno
  • Gervais, Jean-Philippe

Abstract

A gravity-based model is developed to explain bilateral trade flows in primary and processed agri-food commodities. It innovates by explicitly accounting for the vertical production linkages between primary and processed agri-food products, tariffs, and subsidies and by estimating the restrictiveness of non-tariff barriers in the upstream sector. Our application focuses on cattle/beef trade flows between forty-two countries. The structural parameters of the model are used to simulate trade flows under various scenarios of import tariffs and domestic and export subsidies reductions. The United States and Australia emerge as the exporting countries that stand to benefit the most from cuts in tariffs and subsidies as bovine meat imports in the European Union and Japan significantly increase. A bootstrap procedure is used to generate confidence intervals around predicted trade liberalization outcomes.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2744.

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Date of creation: 01 Apr 2007
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Handle: RePEc:pra:mprapa:2744

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Keywords: Gravity model; cattle/beef trade;

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Cited by:
  1. Jayasinghe, Sampath J.D.Y. & Beghin, John C. & Moschini, GianCarlo, 2010. "Determinants of World Demand for U.S. Corn Seeds: The Role of Trade Costs," Staff General Research Papers 13018, Iowa State University, Department of Economics.
  2. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 167-190.
  3. Raimondi, Valentina & Olper, Alessandro, 2009. "The sensitivity of trade flows to trade barriers," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 50658, Agricultural and Applied Economics Association.

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