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GTAP Resource #5316

"The Effects of Trade Openness on Food Prices and Welfare: A Monte Carlo Approach"
by Mi, Raymond and Brian Fisher

The effects of trade openness on food prices and its consequence on national welfare are extremely complex. The findings are subject to different circumstances and they cannot be oversimplified by the neoclassical theory of comparative advantage. In this paper, the aim is to examine the effects of trade openness on global food prices and national welfare in the light of the uncertainties of climate variability. Given that the net global agricultural productivity impact and the variation from one economy to another economy under a global climate event are highly unpredictable, a Monte Carlo method is used to simulate the wide range of productivity and geographical variations.
By assuming the percentage change of factor productivity shock around the globe is normally distributed under a climate event, the current version of GTAP model 6.2 plus the latest GTAP database 9.0 is run for 18,000 times by three sets of productivity shocks. Each productivity shock has 16 randomly drawn elements. Each element corresponds to an agricultural factor productivity disturbance to one of the 16 economies aggregated from the GTAP 9.0 database.
Our results found that trade openness can contribute to reducing the volatility of the world food prices. It also has an impact to some degree on the level of the world food prices, but the direction depends on the impacts of the climate events. In respect of national welfare, it is found that while greater trade openness in the agricultural sector could increase welfare in the global scale, it does not automatically increase welfare for every region.

Resource Details (Export Citation) GTAP Keywords
Category: 2017 Conference Paper
Status: Published
By/In: Presented at the 20th Annual Conference on Global Economic Analysis, West Lafayette, IN, USA
Date: 2017
Version: 1
Created: Mi, R. (4/15/2017)
Updated: Mi, R. (4/15/2017)
Visits: 992
- Model validation and sensitivity analysis
- Climate impacts
- Agricultural policies
- Food prices and food security
- The GTAP Data Base and extensions

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