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The Impact of US Subsidies on the World Cotton Market: A Reassessment

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Author Info
Ben Shepherd (Groupe d'Économie Mondiale)

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Abstract

Following a critical review of the existing quantitative literature on cotton subsidies, a vector autoregression (VAR) is used to model the effects of US subsidies on the world cotton market from 1965 to 2001. Surprisingly, subsidies are found to have only a limited impact on prices despite their effects on production and consumption. The dynamic relationships between quantities, prices, stocks and subsidies are found to be considerably more complex than those suggested by basic theory. Finally, simulation results indicate that even large reductions in US subsidies will not necessarily lead to significantly higher world prices.

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Paper provided by EconWPA in its series International Trade with number 0511012.

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Length: 42 pages
Date of creation: 24 Nov 2005
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Handle: RePEc:wpa:wuwpit:0511012

Note: Type of Document - pdf; pages: 42
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Related research
Keywords: Vector Autoregression Subsidies World Prices Cotton Market

Find related papers by JEL classification:
Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  5. Yamada, Hiroshi & Toda, Hiro Y., 1998. "Inference in possibly integrated vector autoregressive models: some finite sample evidence," Journal of Econometrics, Elsevier, vol. 86(1), pages 55-95, June. [Downloadable!] (restricted)
  6. Bruce A. Babcock & John C. Beghin & Jacinto F. Fabiosa & Stephane De Cara & Amani Elobeid & Cheng Fang & Chad E. Hart & Murat Isik & Holger Matthey & Alexander E. Saak & Karen Kovarik & FAPRI Staff, 2002. "Doha Round of the World Trade Organization: Appraising Further Liberalization of Agricultural Markets, The," Food and Agricultural Policy Research Institute (FAPRI) Publications 02-wp317, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
    Other versions:
  7. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25, pages 49-99. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Shepherd, Ben, 2006. "Estimating Price Elasticities of Supply for Cotton: A Structural Time-Series Approach," MPRA Paper 1252, University Library of Munich, Germany. [Downloadable!]
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