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High Trade Costs and Their Consequences: An Estimated Model of African Agricultural Storage and Trade

Author

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  • Porteous, Obie C.
Abstract
How large are trade costs in the world's poorest countries and what are their consequences? I explore this question using a new dataset I have assembled of monthly prices and production of 6 staple grains from 2003 to 2013 in 230 market catchment areas covering all 42 countries of continental sub-Saharan Africa. I estimate and solve a spatial temporal model of monthly storage and trade under uncertainty including storage in each of the 230 markets, overland trade between 413 pairs of markets, and trade with the world market through 30 ports. I then re-solve the model for a counterfactual scenario in which trade costs are lowered to match transportation costs in the rest of the world. I find median intra-national trade costs over 5 times higher than elsewhere in the world along with significant extra costs for trade across borders and with the world market. Lowering trade costs for staple grains results in a 46.4% drop in the average food price index, a contraction in the agriculture, storage, and trade sectors, and a net welfare gain of 2.4% ($125 billion equivalent variation). I show that 87.5% of this welfare gain can be achieved by lowering trade costs through ports and along key links representing just 18% of the trade network, supporting a corridor-based approach for infrastructure investment and trade policy. In an extension, I find that the effects of agricultural technology adoption depend crucially on trade costs, with farmers only benefiting from technology adoption when trade costs are low.

Suggested Citation

  • Porteous, Obie C., 2015. "High Trade Costs and Their Consequences: An Estimated Model of African Agricultural Storage and Trade," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205776, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:205776
    DOI: 10.22004/ag.econ.205776
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    References listed on IDEAS

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    Cited by:

    1. Helena Afonso & Sebastian Vergara, 2022. "Exporters in Africa: What Role for Trade Costs?," Journal of African Trade, Springer, vol. 9(1), pages 144-158, December.
    2. Santeramo, Fabio G., 2017. "On Non-Tariff Measures and Changes in Trade Routes: From North-North to South-South Trade?," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 263493, European Association of Agricultural Economists.
    3. Glenn Jenkins & Shahrzad Safaeimanesh, 2021. "Estimation of the Potential Economic Welfare Gains to SACU from Trade Facilitation," Working Paper 1462, Economics Department, Queen's University.
    4. Reynal-Querol, Marta & García-Montalvo, José, 2017. "Ethnic Diversity and Growth: Revisiting the Evidence," CEPR Discussion Papers 12400, C.E.P.R. Discussion Papers.
    5. Santeramo, Fabio Gaetano & Lamonaca, Emilia, 2019. "On the impact of non-tariff measures on trade performances of the African agri-food sector," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 58(4), February.
    6. repec:ocp:ppaper:pb1803 is not listed on IDEAS
    7. José Garcia Montalvo & Marta Reynal-Querol, 2017. "Ethnic diversity and growth: revisiting the evidence," Economics Working Papers 1585, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Gouel, Christophe & Laborde, David, 2021. "The crucial role of domestic and international market-mediated adaptation to climate change," Journal of Environmental Economics and Management, Elsevier, vol. 106(C).
    9. Hatzenbuehler, Patrick L. & Mavrotas, George & Maikasuwa, Mohammed Abubakar & Aliyu, Abdulrahaman & Bashir, Amina, 2018. "Grain storage and marketplace characteristics in Kebbi State, Nigeria," NSSP working papers 54, International Food Policy Research Institute (IFPRI).

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