Agricultural Tariffs or Subsidies: Which are More Important for Developing Countries?

Posted: 30 Jul 2008

See all articles by Bernard Hoekman

Bernard Hoekman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR); Economic Research Forum (ERF)

Francis Ng

World Bank - Development Research Group (DECRG)

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Abstract

This article assesses the impact of the world price-depressing effect of agricultural subsidies and border protection in OECD countries on developing economies' exports, imports, and welfare. Developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers, whereas net importers may lose as world prices rise. A simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities. Simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies' exports and welfare than a 50 percent reduction in agricultural subsidies. Although there is significant heterogeneity across developing economies, the results suggest that efforts in the Doha Round of WTO negotiations should be directed at substantially reducing border protection.

Keywords: Agricultural subsidies, tariffs, trade policies, WTO negotiations, Doha Round

JEL Classification: F13, F14

Suggested Citation

Hoekman, Bernard and Ng, Francis and Olarreaga, Marcelo, Agricultural Tariffs or Subsidies: Which are More Important for Developing Countries?. World Bank Economic Review, Vol. 18, No. 2, 2004, Available at SSRN: https://ssrn.com/abstract=1175319

Bernard Hoekman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

via Boccaccio 121
Florence, Florence 50133
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Economic Research Forum (ERF) ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

Francis Ng (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-8088 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/fng

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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