Rain, Agriculture, and Tariffs

38 Pages Posted: 20 Apr 2016

See all articles by Paulo Bastos

Paulo Bastos

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE); ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

Jaime A. Urrego

Inter-American Development Bank (IDB)

Date Written: March 1, 2013

Abstract

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.

Keywords: Agribusiness, Economic Theory & Research, Markets and Market Access, Free Trade, Science of Climate Change

Suggested Citation

Bastos, Paulo and Straume, Odd Rune and Urrego, Jaime A., Rain, Agriculture, and Tariffs (March 1, 2013). World Bank Policy Research Working Paper No. 6394, Available at SSRN: https://ssrn.com/abstract=2240806

Paulo Bastos

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE) ( email )

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jaime A. Urrego

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
17
Abstract Views
414
PlumX Metrics