Pandemics, food security and the gains from trade

Mountford, Andrew (2020): Pandemics, food security and the gains from trade.

Abstract

Why has the recent covid-19 pandemic led to the imposition of export quotas in many countries? Why is the agricultural sector highly protected in developed economies? We show how the addition of subsistence constraints to the standard models of international trade together with a potential shock to trade offers a simple explanation of these facts. This simple adaption of the standard trade model also provides a new mechanism for the existence of a ’Transfer Paradox’. A transfer of resources prior to production acts as a kind of ex ante insurance against trade disruption which mitigates the effects of the missing market for trade disruption insurance. The effect of a transfer can be large enough that both the donor and recipient benefit. Although the analysis focuses on agricultural goods it applies to any good or technology regarded as essential for production.

• Item Type: MPRA Paper
• Language: English
• Keywords: International Trade , Income Distribution, Growth and Development
• Subjects: F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth

References

Cheng Leonard, Uncertainty and Economnic Self Sufficiency, (1987) Journal or International Economics 23 (1987) 167-178. North-Holland

Hanrahan, Charles; Randy Schnepf (22 January 2007). ”WTO Doha Round:The Agricultural Negotiations” (PDF). Congressional Research Service. http://www.nationalaglawcenter.org/wp-content/uploads/assets/crs/RL33144.pdf

Galor Oded and Andrew Mountford, (2008) ”Trading Population for Productivity: Theory and Evidence”, Review of Economic Studies, 75(4), 1143-1179, October 2008

Galor Oded and David N. Weil, (2000), ”Population, Technology and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond,” American Economic Review, 90, 806-828, (September 2000)

Head, Keith, Thierry Mayer, John Ries.(2011), ”The erosion of colonial trade linkages after independence”,.Journal of International Economics, 81(1),1-14.

Kremer, Michael, (1993), ”The O-Ring Theory of Economic Development” The Quarterly Journal of Economics, 108(3), 551–575, August 1993

Krugman Paul (1981) ”Trade, accumulation, and uneven development” Journal of Development Economics, 8(2), 149-161

Laborde, David, Abdullah Mamun, and Marie Parent. 2020. COVID-19 Food Trade Policy Tracker [dataset]. Washington, DC: International Food Policy Research Institute (IFPRI). https://www.ifpri.org/project/covid-19-food-trade-policy-tracker.

Newbery, David M. G. and Joseph E. Stiglitz, 1984. ”Pareto Inferior Trade,” Review of Economic Studies, Oxford University Press, vol. 51(1), pages 1-12.

Martin, Phillipe, Mayer, Thierry, and Mathias Thoenig, (2008) Make Trade Not War?Review of Economic Studies (2008) 75, 865–900

Pomery, John, (1984), Uncertainty in trade models, Chapter 9,Handbook of International Economics(Vol. 3, pp. 285-367). Elsevier.

Rohner, Dominic, Thoenig, Mathias and Fabrizio Zilibotti, (2013), War Signals: A Theory ofTrade, Trust, and Conflict Review of Economic Studies (2013) 80, 1114–1147

Sen, Amartya, (1982), ”Poverty and famines: an essay on entitlement and deprivation” Oxford University Press.

World Trade Organisation (2017) , Proposal on Domestic Support, Public Stockholding for Food Security Purposes and Cotton from Brazil, EU, Colombia, Peru and Uruguay (July 2017) http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc 155777.pdf