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Research Institute of Industrial Economics (IFN) Working Paper Series

No 1129:
The Local Impacts of Agricultural Subsidies: Evidence from the Canadian Prairies

Ray Bollman and Shon Ferguson ()

Abstract: We estimate the impact of the removal of a railway transportation subsidy on the local economies of Alberta, Saskatchewan and Manitoba, exploiting the large regional variation in these one-time freight rate increases. We find that higher freight rates and hence lower farm gate prices resulted in significantly lower farm revenues, farm asset values and farm numbers. Local employment in non-agricultural sectors systematically declined in areas that were hardest hit by the subsidy removal. The results suggest that the subsidy removal had detrimental spillover effects on local non-agricultural economy that are much larger than standard input-output models would predict.

Keywords: Agricultural Trade Liberalization; Export Subsidy; Market Access; Spillovers; (follow links to similar papers)

JEL-Codes: F14; O13; Q16; Q17; Q18; (follow links to similar papers)

45 pages, June 30, 2016

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