European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Bilateral Trade Agreements and Trade Distortions in Agricultural Markets

Cornelius Hirsch () and Harald Oberhofer ()
Additional contact information
Cornelius Hirsch: Austrian Institute of Economic Research (WIFO)
Harald Oberhofer: Department of Economics, Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO)

Abstract: Agricultural support levels are at a crossroad with reduced distortions in OECD countries and increasing support for agricultural producers in emerging economies over the last decades. This paper studies the determinants of distortions in the agricultural markets by putting a specific focus on the role of trade policy. Applying various different dynamic panel data estimators and explicitly accounting for potential endogeneity of trade policy agreements, we find that an increase in the number of bilateral free trade agreements exhibits significant short- and long-run distortion reducing effects. By contrast, WTO's Uruguay Agreement on Agriculture has not been able to systematically contribute to a reduction in agriculture trade distortions. From a policy point of view our findings thus point to a lack of effectiveness of multilateral trade negotiations.

Keywords: Agricultural distortions, WTO, bilateral trade agreements, panel data

JEL-codes: C23; C26; F13; F14 February 2017

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