Trade, import competition and productivity growth in the food industry

Melitz and Ottaviano’s (2008) firm-heterogeneity model predicts that trade liberalization induces a selection process from low to high productivity firms, which translates to an industry productivity growth. A similar firms’ selection effect is induced by market size. In this paper, these predictions are tested across 25 European countries and 9 food industries, over the 1995–2008 period. Using different dynamic panel estimators we find strong support for the model predictions, namely that an increase in import penetration is systematically positively related to productivity growth. The results are robust to measurement issues in productivity, controlling for market size, country and sector heterogeneities, and for the endogeneity of import competition. Interestingly, this positive relationship is almost exclusively driven by competition in final products coming from developed (especially EU-15) countries suggesting that EU food imports are closer substitutes for domestic production than non-EU imports. These results have some potentially interesting policy implications.

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Spatial equilibrium and price transmission between Southern African maize markets connected by informal trade

Policies regulating the international grain trade in Southern Africa (SA) are motivated by uncertainty regarding private sector performance and, in turn, private sector performance is generally constrained by the policy environment. We study spatial price transmission between SA maize markets where trade is dominated by informal product flows. This provides an opportunity to study private sector market performance in a largely unregulated market environment. Contrary to some existing evidence on the performance of SA grain markets connected by formal trade, we find that informally trading markets work quite well. Long-run price equilibrium is consistent with competitive trade, price transmission is rapid, and potential trade constraints have no disruptive impact on long-run relationships. Nevertheless, we do find evidence of occasionally high transfer costs that may impede informal trade flows. The conclusion is that a policy focus on encouraging informal trade and lowering informal trade costs would lead to improved market performance.

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Food security policy options for China

As China becomes more industrial and urbanized, it is likely to become more dependent over time on imports of (especially land-intensive) farm products, most notably livestock feedstuffs. If farmers are slow to adjust to their declining competitiveness, for example by obtaining off-farm employment, the farm–nonfarm household income gap may increase. A decline in food self-sufficiency may be perceived as undermining national food security, and a persistent farm–nonfarm income gap as contributing to social unrest. In these circumstances, what offsetting or compensating policy options should the government consider for ensuring adequate long-term food security and less income inequality? This paper evaluates China’s historical record since 1980 and then projects China’s economy to 2030, using the GTAP global economy-wide model. It draws on past policy experiences of both China and other economies to evaluate prospective interventions by government to address food security and income inequality concerns. The potential effects of some of those are estimated for 2030, again using the GTAP model. The paper concludes by suggesting alternative ways to achieve the fundamental objectives of national food security and less rural–urban income inequality, namely via generic social safety nets and improved rural infrastructure.

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Quantitative economic impact assessment of invasive plant pests: What does it require and when is it worth the effort?

According to the International Plant Protection Convention and the World Trade Organization Agreement on the Application of Sanitary and Phytosanitary measures, any measure against the introduction and spread of new pests must be justified by a science-based pest risk analysis. Economic impact assessments are usually carried out using a qualitative approach, based on classifying the size of impact into five categories, from “minimal” to “massive”. Whilst the qualitative approach may be adequate in many instances, it lacks transparency and demonstrable objectivity.

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