Crop Failures and Export Tariffs

30 Pages Posted: 30 Jan 2014

See all articles by Pio Baake

Pio Baake

German Institute for Economic Research (DIW Berlin)

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: December 2013

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.

Keywords: Grain markets, food prices, export tariffs, oligopoly and oligopsony

JEL Classification: D43, F12, L13, Q17

Suggested Citation

Baake, Pio and Huck, Steffen, Crop Failures and Export Tariffs (December 2013). DIW Berlin Discussion Paper No. 1342. Available at SSRN: https://ssrn.com/abstract=2387510 or http://dx.doi.org/10.2139/ssrn.2387510

Pio Baake (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Steffen Huck

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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