On Export Duration Puzzles
(Published)
(with Bruno Larue, and Carl Gaigné)
We investigate two puzzles in the export duration literature. The first puzzle has to do with the frequent entries and exits of firms in export markets, which are at odds with the large fixed export costs in such markets. We introduce convex production technologies in a trade model to show how variable marginal costs create direct linkages between export markets. As fixed export costs vary across destinations, more productive firms need not necessarily export to more destinations. Cost convexity implies that the probability of supplying a given export market is adversely affected by positive export shocks in other markets. This is supported by our empirical analysis of bilateral flows for over 200 agri-food products to 176 destinations originating from six large exporting countries. The second puzzle has to do with the paradoxical effect of tariffs reported in empirical export duration studies. When endogeneity is addressed, tariffs increase the probability of an export failure.
Animal Disease Outbreak and Border Closure
(Working paper)
(with Bruno Larue, and Lota Tamini)
International trade in live animals and animal products is hindered by animal disease outbreaks that quickly spread between countries. We rely on an empirical framework builds on the multi-sample selection model (MSSM) to investigate how animal-specific diseases affect aggregate trade flows at the extensive and intensive margins of trade in animal and animal products over time. We found that foot and mouth disease impacts negatively on the extensive and the intensive margins of trade in cattle and beef sector for seven years. Unlike the case of economic integration agreements (EIAs) in Baier et al. (2014), our results show that the extensive margin effects of the disease outbreak are larger than its corresponding intensive margin effects. Regarding cross-species effects, the avian flu and swine fever reduce the probability and the level of trade in cattle and beef.
A Counterfactual Experiment About The Eradication of Cattle Disease On Beef Trade
(Published)
(with Bruno Larue)
In response to disease outbreak alerts in exporting countries, importing countries usually impose trade bans that vary in terms of product coverage and in terms of duration. We rely on a unique balanced panel dataset that covers 4-digit disaggregated beef product over the 1996-2013 period, to estimate the effect of a hypothetical removal of animal diseases outbreaks on trade flows. More specifically, we investigate how bovine spongiform encephalopathy (BSE) and the foot and mouth diseases (FMD) affect beef trade flows. We use a sectoral structural gravity approach to measure direct, conditional and full effects, allowing inward and outward multilateral resistance indices and factory-gate prices to adjust to the eradication of animal disease. The indirect channels through which BSE and FMD impact trade are important. Our counterfactual experiment suggests that Canada would be one of the countries gaining the most from BSE and FMD eradication.
Factors Influencing the marketing decisions of small landholders in the Ivory Coast
(Published)
(with Gabriel Lawin)
Small farmers in developing countries typically retain part of their output and market the rest. Our econometric model was estimated on a detailed dataset about 3,393 farmers. Our results show that farmers that are members of a cooperative and who are land-tenure secured tend to market more, all else equal. Female-headed households sold lower proportions of their output than male farm- ers with similar characteristics and facing similar circumstances. Labour shortage is a major impediment to crop output commercialization. From a policy perspective, governments should encourage collective actions and the creation of cooperatives, facilitate farmers’ access to credit, and invest in extension services to improve farm productivity.
Gravity with Convex Technologies
(Working paper)
(with Carl Gaigné and Bruno Larue)
A key hypothesis of the gravity model is that firms production function exhibits constant marginal cost. An implication of that hypothesis firm’s sales in one market have no impact on its cost and competitiveness on all markets. However, recent empirical evidence suggests that firms have increasing marginal cost (IMC) or equivalently a decreasing return to scale (DRS). DRS is particularly pertinent in agricultural trade because many primary agricultural products take a long time to produce and are perishable. In addition to that, firm may also face capacity constraints due to investment lags. Contracts between producers and processors make supply rather insensitive to shocks in export markets. In this paper we relax a key hypothesis that of constant return to scale (CRS) in the Anderson and van Wincoop (2003) gravity to introduce the decreasing return to scale (DRS) hypothesis. The first contribution in this paper is the development of a theoretical framework to address the incidence of increasing marginal costs on trade intensive margins. The second contribution is to empirically test whether the decreasing return to scale hypothesis is verified in the agricultural sector. For this purpose, we compute the magnitude of the parameter of convexity along with trade elasticities.