Why Governments Tax or Subsidize Trade: Evidence from Agriculture

40 Pages Posted: 19 May 2010

See all articles by Kishore Gawande

Kishore Gawande

University of Texas at Austin

Bernard Hoekman

Robert Schuman Centre for Advanced Studies; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR)

Date Written: April 2010

Abstract

This paper empirically explores the political-economic determinants of why governments choose to tax or subsidize trade in agriculture. We use a new data set on nominal rates of assistance (NRA) across a number of commodities spanning the last four decades for 64 countries. NRAs measure the effect on domestic (relative to world) price of the scala of quantitative and price-based instruments used to regulate agriculture The data set admits consideration of effective taxes and subsidies on exports and imports. We find that both economic and political variables play important roles in determining the within-variation in the NRA data. Based on our results we offer a number of data-driven exploratory hypotheses that can inform future theoretical and empirical research on why governments choose to tax or subsidize agricultural products - an important policy question that is also one of the least understood by scholars.

Keywords: agriculture, political economy, trade policy

JEL Classification: F13, F14, Q18

Suggested Citation

Gawande, Kishore and Hoekman, Bernard, Why Governments Tax or Subsidize Trade: Evidence from Agriculture (April 2010). CEPR Discussion Paper No. DP7787, Available at SSRN: https://ssrn.com/abstract=1611483

Kishore Gawande (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Bernard Hoekman

Robert Schuman Centre for Advanced Studies ( email )

Fiesole, Tuscany
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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