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Bilateral Trade Agreements and Trade Distortions in Agricultural Markets

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  • Hirsch, Cornelius

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  • Oberhofer, Harald

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Abstract

Agricultural support levels are at a crossroad with reduced distortions in OECD countries and increasing support for agricultural producers in emerging economies over the last decades. This paper studies the determinants of distortions in the agricultural markets by putting a specific focus on the role of trade policy. Applying various different dynamic panel data estimators and explicitly accounting for potential endogeneity of trade policy agreements, we find that an increase in the number of bilateral free trade agreements exhibits significant short- and long-run distortion reducing effects. By contrast, WTO's Uruguay Agreement on Agriculture has not been able to systematically contribute to a reduction in agriculture trade distortions. From a policy point of view our findings thus point to a lack of effectiveness of multilateral trade negotiations.

Suggested Citation

  • Hirsch, Cornelius & Oberhofer, Harald, 2017. "Bilateral Trade Agreements and Trade Distortions in Agricultural Markets," Department of Economics Working Paper Series 5428, WU Vienna University of Economics and Business.
  • Handle: RePEc:wiw:wus005:5428
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    More about this item

    Keywords

    Agricultural distortions; WTO; bilateral trade agreements; panel data;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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