Agricultural Trade, Biodiversity Effects and Food Price Volatility

40 Pages Posted: 14 Jul 2015

See all articles by Cecilia Bellora

Cecilia Bellora

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Jean-Marc Bourgeon

French National Institute for Agricultural Research (INRA) - UMR Economie Publique; Ecole Polytechnique - Economic Department

Date Written: June 30, 2015

Abstract

Biotic factors such as pests create biodiversity effects that increase production risks and decrease land productivity when agriculture becomes more specialized. We show in a Ricardian two-country trade setup that production specialization is incomplete under free trade because of the decrease in land productivity. Pesticides allow farmers to reduce these biodiversity effects, but they are damaging for the environment and for human health. When regulating farming practices under free trade, governments face a trade-off: they are tempted to restrict pesticide use compared to under autarky because domestic consumption partly relies on imports and thus depends less on them, but they also want to preserve the competitiveness of their agricultural sector on international markets. We show that at the symmetric equilibrium under free trade, restrictions on pesticides are generally more stringent than under autarky. As a result, trade increases the price volatility of crops produced by both countries, and of some or all of the crops that are country-specific, depending on the intensity of the biodiversity effects.

Keywords: agricultural trade, food prices, agrobiodiversity, pesticides

JEL Classification: F180, Q170

Suggested Citation

Bellora, Cecilia and Bourgeon, Jean-Marc, Agricultural Trade, Biodiversity Effects and Food Price Volatility (June 30, 2015). CESifo Working Paper Series No. 5417, Available at SSRN: https://ssrn.com/abstract=2630521

Cecilia Bellora

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

20 avenue de S├ęgur
Paris, 75007
France

HOME PAGE: http://www.cepii.fr/

Jean-Marc Bourgeon (Contact Author)

French National Institute for Agricultural Research (INRA) - UMR Economie Publique ( email )

Centre de Grignon
BP01
Thiverval-Grignon, 78850
France

Ecole Polytechnique - Economic Department ( email )

Palaiseau, 91128
France

HOME PAGE: http://www.polytechnique.edu

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