() and Johan Gars
Shon Ferguson: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics (IFN), P.O. Box 55665, SE-102 15 Stockholm, Sweden
Johan Gars: GEDB, Postal: Royal Swedish Academy of Sciences
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.
32 pages, February 3, 2016
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