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Crop Failures and Export Tariffs

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  • Pio Baake
  • Steffen Huck

Abstract

We analyse a stylized model of the world grain market characterized by a small oligopoly of traders with market power on both the supply and demand side. Crops are stochastic and exporting countries can impose export tariffs to protect domestic food prices. Our first results is that export tariffs are strategic complements and that for poor harvests equilibrium tariffs can explode (shedding some light on recent volatility in world food prices). We also show that the strategic interplay between governments of export countries and traders can give rise to a number of peculiar comparative statics. For example, it can be in the interest of traders to have poor harvests in one of the countries. Finally, we demonstrate that traders as well as consumers in import countries can benefit from cooperation between grain exporting countries.

Suggested Citation

  • Pio Baake & Steffen Huck, 2013. "Crop Failures and Export Tariffs," Discussion Papers of DIW Berlin 1342, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1342
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    References listed on IDEAS

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    1. David S. Jacks & Kevin H. O'Rourke & Jeffrey G. Williamson, 2011. "Commodity Price Volatility and World Market Integration since 1700," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 800-813, August.
    2. Reza Oladi & John Gilbert, 2012. "Buyer and Seller Concentration in Global Commodity Markets," Review of Development Economics, Wiley Blackwell, vol. 16(2), pages 359-367, May.
    3. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    4. 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).
    5. Bellemare, Marc F., 2011. "Rising food prices, food price volatility, and political unrest," MPRA Paper 31888, University Library of Munich, Germany.
    6. Anderson, Kym & Nelgen, Signe, 2012. "Trade Barrier Volatility and Agricultural Price Stabilization," World Development, Elsevier, vol. 40(1), pages 36-48.
    7. Alan V. Deardorff & Indira Rajaraman, 2009. "Buyer Concentration in Markets for Developing Country Exports," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 190-199, May.
    8. Antoine Bouët & David Laborde Debucquet, 2012. "Food crisis and export taxation: the cost of non-cooperative trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(1), pages 209-233, April.
    9. von Braun, Joachim & Tadesse, Getaw, 2012. "Global Food Price Volatility and Spikes: An Overview of Costs, Causes, and Solutions," Discussion Papers 120021, University of Bonn, Center for Development Research (ZEF).
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    More about this item

    Keywords

    Grain markets; food prices; export tariffs; oligopoly and oligopsony;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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