Impact of Grain Trade Policies on Prices and Welfare : Evidence from Malawi
Restricting cross-border trade through export bans in an attempt to stabilize domestic prices has been a particularly popular policy tool used by many sub-Saharan countries in recent years. However, little is known about how the variability in harv...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/571291602596745920/Impact-of-Grain-Trade-Policies-on-Prices-and-Welfare-Evidence-from-Malawi http://hdl.handle.net/10986/34631 |
| Summary: | Restricting cross-border trade through
export bans in an attempt to stabilize domestic prices has
been a particularly popular policy tool used by many
sub-Saharan countries in recent years. However, little is
known about how the variability in harvests and seasonality
-- two critical dimensions of smallholder agriculture in
Africa -- mediate the effects of export bans on household
welfare. This study assesses the short-term impact of export
bans on prices and welfare of households in Malawi,
accounting for these heterogeneities. It uses monthly panel
data on maize prices from 152 markets in Malawi and
neighboring countries. To identify the impacts of the bans,
the study compares the change in price dispersion between a
domestic market in Malawi and another market in a
neighboring country, relative to the price dispersion
between the domestic market and other markets within Malawi
that are at a similar distance as the domestic-foreign
market pair. The findings show that export bans, in the
short run, are associated with lower domestic prices, lower
relative prices, and less seasonality in prices in Malawi.
This is after accounting for harvest levels and the
existence of trade restrictions in neighboring countries.
The short-run effects of the export bans help explain why
policymakers are likely to engage in the use of such
policies. However, the welfare analysis shows that the
welfare gains and poverty reduction effects are small in
magnitude and likely to be offset by the long-run
distortionary effects of restrictive trade policies. |
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