Trade Costs of Heterogeneous Agricultural Products

Presenter: Stephan von Cramon-Taubadel

Abstract:

It is believed that trade costs for agricultural commodities are large and thus important. To date, estimates of agricultural trade costs have generally been made at the sectoral level, and neglect heterogeneity across products. We apply a theory-founded gravity measure that incorporates cross-product heterogeneity to newly assembled data on trade and production. The sample covers 125 agricultural products across 156 countries from 1992 to 2011. We first estimate the elasticity of substitution for each product, and then use it to calculate trade costs. Low-income countries and Sub-Saharan African countries have the highest trade costs but have achieved the largest reduction in these costs over the study period. For many other country groups, trade costs have not fallen over the study period. We also estimate the determinants of agricultural trade costs. Heterogeneity across products explains the variation of trade costs to a large extent, and fuel prices shape the trends of trade costs over time. We also demonstrate that trade institutions play a significant role in reducing trade costs.

About the co-author:

Stephan von Cramon-Taubadel is Professor for Agricultural Policy in the Department of Agricultural Economics and Rural Development of the University of Göttingen. Stephan completed his BSc (McGill University) and MSc (University of Manitoba) degrees in Canada and his PhD in Germany (University of Kiel). From 2000 to 2006 he was Editor-in-Chief of Agricultural Economics, the official journal of the International Association of Agricultural Economists (IAAE), and he is currently Secretary-Treasurer of the IAAE. His work focuses on the analysis of agricultural policies as well as on price transmission and market integration. Stephan has worked extensively in the EU, the countries of the Former Soviet Union, and Latin America, and with a variety of institutions such as the World Bank and the FAO. He coordinates a joint MSc program between the University of Göttingen, the Universidad de Talca in Chile and Bogor Agricultural University in Indonesia. Stephan is married and has 4 children.