Rain, Agriculture, and Tariffs

This paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector. In a model of strategic trade policy, the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous, depending on the weight placed by the domestic policy maker on tariff revenue, profits and the consumer surplus. The more weight placed on domestic profits, the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs. These findings are robust to alternative assumptions about market structure and the timing of the game. Using detailed panel data on applied tariffs and rainfall for 70 nations, the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports.

Bibliographic Details

Main Authors:	Bastos, Paulo, Straume, Odd Rune, Urrego, Jaime A.
Language:	English en_US
Published:	World Bank, Washington, DC 2013-03
Subjects:	AGRICULTURAL COMMODITIES, AGRICULTURAL ECONOMIC, AGRICULTURAL ECONOMICS, AGRICULTURAL EXPORTS, AGRICULTURAL GOOD, AGRICULTURAL GOODS, AGRICULTURAL IMPORTS, AGRICULTURAL LAND, AGRICULTURAL MARKETS, AGRICULTURAL OUTPUT, AGRICULTURAL PRICES, AGRICULTURAL PRODUCT, AGRICULTURAL PRODUCTION, AGRICULTURAL PRODUCTIVITY, AGRICULTURAL PRODUCTS, AGRICULTURAL SECTOR, AGRICULTURAL TRADE, AGRICULTURE, AIR, AIR TEMPERATURE, AMOUNT OF RAINFALL, ANIMAL OILS, APPAREL, APPLIED TARIFF, ARBITRAGE, AVERAGE RAINFALL, BASE YEAR, BILATERAL IMPORTS, COMPARATIVE ADVANTAGE, COMPETITIVE EQUILIBRIUM, COMPETITIVE MARKETS, CONSUMER SURPLUS, CONSUMPTION LEVELS, COST FUNCTIONS, COST INCREASE, DAIRY, DAIRY PRODUCTS, DEMAND FUNCTION, DEMAND FUNCTIONS, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DOMESTIC CONSUMERS, DOMESTIC DEMAND, DOMESTIC MARKET, DOMESTIC PRODUCER, DOMESTIC PRODUCERS, DOMESTIC PRODUCTION, ECONOMETRIC ANALYSIS, ECONOMIC IMPACTS OF CLIMATE, ECONOMIC IMPACTS OF CLIMATE CHANGE, ECONOMIC RESEARCH, ESSENTIAL OILS, EXPORT, EXPORT MARKETING, EXPORT PRICE, EXPORT SUBSIDIES, EXPORTERS, EXPORTS, EXTREME EVENTS, EXTREME WEATHER, EXTREME WEATHER EVENTS, FATS, FOOD DEMAND, FOREIGN INDUSTRIES, FOREIGN PRODUCER, FOREIGN PRODUCERS, FOREIGN PRODUCTION, FOREIGN SUPPLIERS, FREE TRADE, GENERAL EQUILIBRIUM MODEL, HOME MARKET, IMPACT OF RAINFALL, IMPERFECT COMPETITION, IMPORT TARIFFS, INDUSTRIAL POLICY, INTERNATIONAL MARKET, INTERNATIONAL TRADE, INTERNATIONAL TRADE POLICY, LIVE ANIMALS, MACROECONOMICS, MARGINAL COST, MARGINAL COSTS, MARGINAL EFFECTS, MARGINAL PRODUCTION, MARKET POWER, MARKET PRICE, MARKET SHARE, MARKET SHARES, MARKET STRUCTURE, MARKETING, MARKETING BOARD, MARKETING BOARDS, MEAT, MEAT PRODUCTS, NASH EQUILIBRIUM, OLEAGINOUS FRUITS, OLIGOPOLISTIC INDUSTRIES, OLIGOPOLY, OPENNESS, PERFECT COMPETITION, POLITICAL ECONOMY, PRICE ELASTICITY, PRICE ELASTICITY OF DEMAND, PRICE INCREASE, PRICE POLICIES, PRODUCER PRICE, PRODUCTION COSTS, RAIN, RAINFALL, RAINFALL DATA, RAINFALL DISTRIBUTION, RAINFALL LEVELS, REGRESSION ANALYSIS, RETURNS TO SCALE, SALE, SEASON, SPREAD, STRATEGIC TRADE POLICY, SUGAR, SUPPLY CURVE, SUPPLY FUNCTION, SUPPLY FUNCTIONS, TANNING, TARIFF REVENUE, TAX REVENUES, TELECOMMUNICATIONS, TOTAL OUTPUT, TRADE AGREEMENTS, TRADE DISPUTES, TRADE POLICY, TRADE REFORM, VOLUME, WEALTH, WINDOW OF OPPORTUNITY, WORLD MARKETS, WORLD TRADE,
Online Access:	http://documents.worldbank.org/curated/en/2013/03/17493992/rain-agriculture-tariffs https://hdl.handle.net/10986/13177
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