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Why Governments Tax or Subsidize Trade: Evidence from Agriculture

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  • Gawande, Kishore
  • Hoekman, Bernard

Abstract

This paper empirically explores the political-economic determinants of why governments choose to tax or subsidize trade in agriculture. We use a new data set on nominal rates of assistance (NRA) across a number of commodities spanning the last five decades for 64 countries. NRAs measure the effect on domestic (relative to world) price of the quantitative and price-based instruments used to regulate agricultural markets. The data set admits consideration of both taxes and subsidies on exports and imports. We find that both economic and political variables play important roles in determining the within-variation in the NRA data. Based on our results we offer a number of data-driven exploratory hypotheses that can inform future theoretical and empirical research on why governments choose to tax or subsidize agricultural products – an important policy question that is also one of the least understood by scholars.

Suggested Citation

  • Gawande, Kishore & Hoekman, Bernard, 2009. "Why Governments Tax or Subsidize Trade: Evidence from Agriculture," Agricultural Distortions Working Paper Series 50300, World Bank.
    • Handle: RePEc:ags:wbadwp:50300
    DOI: 10.22004/ag.econ.50300
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    Cited by:

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    2. Jan Fałkowski & Alessandro Olper, 2014. "Political competition and policy choices: the evidence from agricultural protection," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 143-158, March.

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    More about this item

    Keywords

    Agricultural and Food Policy; International Relations/Trade;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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