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• W2024899544 abstract "Abstract A gravity model is developed to explain bilateral trade flows in primary and processed commodities within the same agri-food supply chain. It accounts for vertical production linkages, trade and domestic policies, and supply rigidities at the farm level. Our application focuses on cattle/beef trade flows between 42 countries. The estimated parameters of the model are used to simulate trade flows. We found large differences in the impacts of the full and partial liberalization scenarios. A parametric bootstrap procedure is used to generate confidence intervals around predicted trade liberalization outcomes. Keywords: gravity modeltariffstrade barrierstrade liberalizationJEL Classifications: F13Q17 Notes 1. The most publicized dispute about a sanitary regulation is perhaps the EU ban on hormone-treated cattle/beef (Bureau, Marette, and Schiavina Citation1998; Wilson, Otsuki, and Majumdsar Citation2003). Canada and the US challenged the EU ban on imports of hormone-treated cattle/beef, but the ban remained in effect even when the World Trade Organization's (WTO's) dispute settlement panels ruled that it ought to be lifted. The EU chose to be subject to retaliatory measures by the US and Canada. The role of the embargo on hormone-treated cattle/beef in the empirical model will be discussed below. 2. The ‘constant elasticity aggregator’ has also been used in empirical studies aiming at measuring technical efficiency in the case of multi-output production function (e.g. Fernandez, Koop, and Steel Citation2005). 3. Data featuring long panels would have been better suited but were not available. 4. Martin and Pham (Citation2008) argued that the PPML advocated by Santos Silva and Tenreyro (Citation2006) may suffer from a bias when a large number of zeros are present in the data and proposed the threshold Tobit estimation method of Eaton and Tamura (Citation1994). Santos Silva and Tenreyro (Citation2009) responded by showing that the PPML method performs well when the data is generated as a finite mixture of gamma variates, naturally characterized by a large proportion of zeros. Santos Silva and Tenreyro (Citation2009) also argued that the simulation outcomes in Martin and Pham (Citation2008) are defective because the data is not generated by a constant elasticity model. 5. It is important to note that the assumption of monopolistic competition has no qualitative and quantitative implications in the empirical model as the mark-up σ/(σ−1) is absorbed in the constant term of the regression. 6. The cattle category covers cattle and buffaloes as specified in the Food and Agriculture Organization (FAO) coding system. It includes breeding and slaughter/feeder cattle. The potential dynamic effects introduced by breeding cattle trade were left aside because of data availability limitations and the small share of breeding cattle in total cattle trade. The beef classification covers meat of cattle; offals of cattle, edible; meat of cattle, boneless; meat of beef dried, salted, smoked; meat of buffaloes; offals of buffaloes, edible; as specified in the FAO coding system. 7. For example, the threshold Tobit estimator of Eaton and Tamura (Citation1994) could be implemented using FIML techniques. 8. It is a common practice in the gravity literature to use the coefficient of the log of distance to make inference about the effect of doubling the distance. This is computed as 2 to the power of the coefficient estimate. From our direct effects, we find that cutting distance in half raises trade in cattle and beef by a multiple of 6.96 and 3.25, respectively. However, these are direct effect estimates that do not account for the complex indirect effects that arise through the multilateral resistance terms and the price equation. 9. This dummy variable captures part of the impacts of the Bovine Spongiform Encephalopathy (BSE) cases in Europe. Given the current sample period, we avoid dealing with potential impacts of BSE cases in North America. 10. We also used the Wald, Lagrange Multiplier (LM) and Rao's F versions of the RESET test. Shukur and Edgerton (Citation2002) showed that Rao's F-test performs particularly well in small samples. All these tests do not reject the null hypothesis that the model is correctly specified. 11. TRQs are two-tier tariffs and act de facto as import quotas in many cases as they set a binding level of imports because in-quota imports are taxed at a very low rate while over-quota imports would be taxed at a very high rate. 12. Copeland (Citation1990) showed that reductions in negotiated tariffs can induce the tightening of non-negotiated trade barriers. In our model, this would exacerbate supply rigidities. However, it could be argued that the provisions of the WTO's Agreement on Agriculture have gone a long way to mitigate supply rigidities and to prevent the abuse of technical regulations in response to liberalization. Our assumption can be seen as a compromise between opposite, yet plausible views. 13. In some studies, the border effects are computed in terms of the ease with which goods are exported relative to the ease with which goods are traded domestically (see McCallum Citation1995; Ch. 5 in Feenstra Citation2004). 14. Standard bootstrapping methods are not appealing in this instance because the model is highly non-linear. 15. The magnitudes of the effects of the full and Doha liberalization scenarios are undoubtedly affected by existing preferential tariff rates. For instance, the impact of full and Doha liberalization scenarios between preferential trade agreement partners is expected to be lower than when reductions are applied to MFN tariff rates, ceteris paribus. 16. For more details, see http://www.wto.org/english/news_e/pres04_e/press378_annex_e.pdf" @default.
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• W2024899544 date "2012-08-01" @default.
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• W2024899544 title "A gravity model to account for vertical linkages between markets with an application to the cattle/beef sector" @default.
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