Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

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

Ray Bollman and Shon Ferguson ()
Additional contact information
Ray Bollman: Rural Development Institute, Postal: Brandon University, and University of Saskatchewan, Canada
Shon Ferguson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

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

JEL-codes: F14; O13; Q16; Q17; Q18

45 pages, June 30, 2016

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