Munich Personal RePEc Archive

Pandemics, food security and the gains from trade

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

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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.

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