Productivity Shocks, International Trade and Import Prices: Evidence from Agriculture

33 Pages Posted: 5 Feb 2016

See all articles by Shon M. Ferguson

Shon M. Ferguson

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Johan Gars

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

Date Written: February 5, 2016

Abstract

The purpose of this study is to measure the sensitivity of trade volumes and unit values to agricultural productivity shocks at home and abroad. We find that the unit values of trade flows vary systematically with production shocks using both aggregate data on a large sample of countries and detailed firm-level imports to Sweden. We find that import prices increase (and import volumes fall) when importer production increases. This result is likely driven by a change in the quality composition of imports or by economies of scale in international trade. This beneficial terms-of-trade effect that we find may thus be an important coping mechanism for food net-importing countries that experience negative production shocks. Our results also suggest that trade volumes are relatively insensitive to changes in production. The results suggest that trade frictions, product differentiation and storage limit the role of international trade as way of coping with production volatility.

Keywords: climate shocks, pass-through, quality sorting, agricultural trade

JEL Classification: F14, F18, Q11, Q17, Q18

Suggested Citation

Ferguson, Shon M. and Gars, Johan, Productivity Shocks, International Trade and Import Prices: Evidence from Agriculture (February 5, 2016). IFN Working Paper No. 1107, Available at SSRN: https://ssrn.com/abstract=2728245

Shon M. Ferguson (Contact Author)

Swedish University of Agricultural Sciences (SLU) - Department of Economics

Box 7013
Ulls hus, Ulls väg 27
Uppsala, 750 07
Sweden

Johan Gars

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics ( email )

The Royal Swedish Academy of Sciences
P.O. Box 50005
S-104 05 Stockholm, SE-104 05
United States

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