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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 four decades for 64 countries. NRAs measure the effect on domestic (relative to world) price of the scala of quantitative and price-based instruments used to regulate agriculture The data set admits consideration of effective 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, 2010. "Why Governments Tax or Subsidize Trade: Evidence From Agriculture," CEPR Discussion Papers 7787, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7787
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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. Anderson, Kym & Martin, Will & Valenzuela, Ernesto, 2006. "The relative importance of global agricultural subsidies and market access," World Trade Review, Cambridge University Press, vol. 5(03), pages 357-376, November.
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    More about this item

    Keywords

    agriculture; political economy; trade policy;

    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

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