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A CGE analysis of trade costs in the Russian agrofood sector

  • Arnim Kuhn
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    Ten years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high-value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi-regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia. Copyright 2005 International Association of Agricultural Economics.

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    Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

    Volume (Year): 33 (2005)
    Issue (Month): 1 (07)
    Pages: 79-90

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    Handle: RePEc:bla:agecon:v:33:y:2005:i:1:p:79-90
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    1. Andrienko, Yuri & Guriev, Sergei, 2003. "Determinants of Interregional Mobility in Russia: Evidence from Panel Data," CEPR Discussion Papers 3835, C.E.P.R. Discussion Papers.
    2. Daniel Berkowitz & David DeJong, 1998. "Russia's Internal Border," William Davidson Institute Working Papers Series 189, William Davidson Institute at the University of Michigan.
    3. Barry K. Goodwin & Thomas J. Grennes & Christine McCurdy, 1999. "Spatial price dynamics and integration in russian food markets," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(2), pages 157-193.
    4. D. Matsnev, 1996. "Will We Maintain the Integrity of the Russian Economic Space?," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 38(11), pages 36-50, March.
    5. James R. Melvin, 1985. "The Regional Economic Consequences of Tariffs and Domestic Transportation Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 237-57, May.
    6. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
    7. Mark D. Partridge & Dan S. Rickman, 1998. "Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal," International Regional Science Review, , vol. 21(3), pages 205-248, December.
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