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Modifying agricultural export taxes to make them less market-distorting

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  • Liefert, William M.
  • Westcott, Paul C.

Abstract

From 2006 to 2014, close to 40 countries levied an export tax on at least one agricultural product. Export taxes impose costs on the global economy by reducing total world welfare compared to free trade, and in particular hurt the tax-imposing country’s own domestic producers of the taxed good. Yet countries with export taxes have objectives that might make it unlikely for them to eliminate, or even reduce, the taxes. This article examines how a conventional export tax could be modified to make it less market-distorting, and thereby less welfare-diminishing, for both the tax-imposing country and the rest of the world. From a total world welfare perspective, the modified policy analyzed here is a “second best” alternative to the first best policy of abolishing the export tax and allowing free trade, but nonetheless it improves global economic welfare compared to the standard export tax. The modified policy discussed here achieves the same economic objectives as the tax, such as reducing the domestic price of the exported good, increasing domestic purchases, and raising revenue, but also generates additional exports beyond the volume that occurs under the tax alone. Also, the tax does not involve any government subsidies to producers or consumers. The main original feature of the modified export tax policy therefore is that it not only increases net economic welfare (compared to the unmodified tax scenario), but does so in a way that does not reduce the welfare of any economic group.

Suggested Citation

  • Liefert, William M. & Westcott, Paul C., 2016. "Modifying agricultural export taxes to make them less market-distorting," Food Policy, Elsevier, vol. 62(C), pages 65-77.
  • Handle: RePEc:eee:jfpoli:v:62:y:2016:i:c:p:65-77
    DOI: 10.1016/j.foodpol.2016.04.001
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    References listed on IDEAS

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    1. Ivan Djuric & Linde Götz & Thomas Glauben, 2015. "Are Export Restrictions an Effective Instrument to Insulate Domestic Prices Against Skyrocketing World Market Prices? The Wheat Export Ban in Serbia," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 215-228, April.
    2. Yu, T. Edward & Tokgoz, Simla & Wailes, Eric & Chavez, Eddie C., 2017. "A quantitative analysis of trade policy responses to higher world agricultural commodity prices:," IFPRI book chapters,in: Agriculture, development, and the global trading system: 2000– 2015, chapter 11 International Food Policy Research Institute (IFPRI).
    3. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    4. David Laborde & Carmen Estrades & Antoine Bouët, 2013. "A Global Assessment of the Economic Effects of Export Taxes," The World Economy, Wiley Blackwell, vol. 36(10), pages 1333-1354, October.
    5. Emran, M. Shahe, 2005. "Revenue-increasing and welfare-enhancing reform of taxes on exports," Journal of Development Economics, Elsevier, vol. 77(1), pages 277-292, June.
    6. Jinglian, Wu & Renwei, Zhao, 1987. "The dual pricing system in China's industry," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 309-318, September.
    7. Götz, Linde & Glauben, Thomas & Brümmer, Bernhard, 2013. "Wheat export restrictions and domestic market effects in Russia and Ukraine during the food crisis," Food Policy, Elsevier, vol. 38(C), pages 214-226.
    8. Jeonghoi Kim, 2010. "Recent Trends in Export Restrictions," OECD Trade Policy Papers 101, OECD Publishing.
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    1. repec:aoj:agafsr:2017:p:37-44 is not listed on IDEAS
    2. repec:eco:journ1:2017-05-64 is not listed on IDEAS

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