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GTAP Resource #4446

"Grain Price Spikes and Beggar-thy-neighbor Policy Responses"
by Jensen, Hans Grinsted and Kym Anderson

Abstract. Upward spikes in the international price of food in recent years led some countries to raise export barriers, thereby exacerbating both the price spike and reducing the terms of trade for food-importing countries (‘beggaring’ their neighbor). At the same time, and for similar political-economy reasons, numerous food-importing countries reduced or suspended their import tariffs, and some even provided food import subsidies. Those actions also exacerbated the price spike, thus turning the terms of trade even further against food-importing countries.
Because this became a major issue in international policy circles (it appeared on the agenda of annual meetings of G20 countries for several years), recent studies have attempted to quantify the extent to which such policy actions contributed to the rise in food prices. Martin and Anderson (2012) and Anderson and Nelgen (2012), for example, use a back-of-the-envelope model to examine the rise in rice, wheat and maize prices in 2006-08. To keep their analysis as simple as possible, they assume each product is homogeneous, no supply responses are possible, the own-price elasticity of demand is the same in all countries, and all cross-price elasticities of supply and demand are zero (so no interaction with livestock or other farm product markets is entertained).
A more-recent study examined this issue using the GTAP model of the world economy, but it focused just on the wheat market (Rutten, Shutes and Meijerink 2013). That study assumes a drought in Australia caused the price spike, and it examines the impact of India imposing a tax on its wheat exports and Tanzania lowering its wheat import tariff.
The purpose of the present paper is to re-visit this important policy issue but to do so more comprehensively. Like Rutten et al. we use the standard GTAP multi- product, multi-country model of the global economy (Hertel 2007). Such a model makes it possible to estimate the extent to which changes in trade res...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal; World Bank Economic Review
Date: 2015
Created: Jensen, H. (4/15/2014)
Updated: Jensen, H. (9/17/2015)
Visits: 1,696
- Agricultural policies
- Food prices and food security

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