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Do Trade Agreements Reduce the Volatility of Agricultural Distortions?

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  • Cadot, Olivier
  • Olarreaga, Marcelo
  • Tschopp, Jeanne

Abstract

The objective of this paper is to evaluate the extend to which trade agreements affect agricultural trade policy volatility. Using a new panel database compiled as part of the World Bank's Agricultural Distortions research project, we estimate the effect of regionalism (proxied in various ways) on the volatility of price distortions measured by the absolute value of their first differences, averaged, for each country and year, over all agricultural goods. Using an instrumental-variable approach to correct for the endogeneity of regional trade agreements, (RTAs), we find that participation in RTAs has a significantly negative effect on agricultural trade-policy volatility. We find that the WTO's agricultural agreement also contributed to reducing agricultural trade-policy volatility, in spite of the weak disciplines involved, but the effect is only weakly identified. Our results are robust to a variety of robustness checks and hold, in particular, for the Latin American sub-sample.

Suggested Citation

  • Cadot, Olivier & Olarreaga, Marcelo & Tschopp, Jeanne, 2009. "Do Trade Agreements Reduce the Volatility of Agricultural Distortions?," Agricultural Distortions Working Paper 50303, World Bank.
  • Handle: RePEc:ags:wbadwp:50303
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    File URL: http://purl.umn.edu/50303
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    References listed on IDEAS

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    1. Anderson, Kym, 1995. "Lobbying Incentives and the Pattern of Protection in Rich and Poor Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 43(2), pages 401-423, January.
    2. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    3. Robert Bates & William Rogerson, 1980. "Agriculture in development: A coalitional analysis," Public Choice, Springer, vol. 35(5), pages 513-527, January.
    4. Kym Anderson & William A. Masters, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications, The World Bank, number 2607.
    5. Anderson, Kym & Kurzweil, Marianne & Martin, Will & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Measuring distortions to agricultural incentives, revisited," World Trade Review, Cambridge University Press, vol. 7(04), pages 675-704, October.
    6. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
    7. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    8. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
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    Citations

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    Cited by:

    1. Valeria Groppo & Roberta Piermartini, 2014. "Trade Policy Uncertainty and the WTO," Discussion Papers of DIW Berlin 1437, DIW Berlin, German Institute for Economic Research.
    2. Kangni R Kpodar & Patrick A. Imam, 2015. "Does A Regional Trade Agreement Lessen or Exacerbate Growth Volatility? An Empirical Investigation," IMF Working Papers 15/177, International Monetary Fund.
    3. Nuno Limão & Giovanni Maggi, 2015. "Uncertainty and Trade Agreements," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 1-42, November.
    4. Kangni Kpodar & Patrick Imam, 2016. "Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 949-979, November.
    5. Matthias Kalkuhl & Lukas Kornher & Matthias Kalkuhl & Irfan Mujahid, 2015. "Food price volatility in developing countries – the role of trade and storage," EcoMod2015 8415, EcoMod.
    6. Bürgi Bonanomi, Elisabeth & Elsig, Manfred & Espa, Ilaria, 2015. "The Commodity Sector and Related Governance Challenges from a Sustainable Development Perspective: The Example of Switzerland Current Research Gaps," Papers 865, World Trade Institute.

    More about this item

    Keywords

    Distorted incentives; agricultural and trade policy reforms; national agricultural development; Agricultural protection; volatility; credibility; Agricultural and Food Policy; International Relations/Trade; F13; F14; Q17; Q18; F10;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • F10 - International Economics - - Trade - - - General

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