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A CGE analysis of trade costs in the Russian agrofood sector

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  • Arnim Kuhn

Abstract

Ten years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high‐value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi‐regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia.

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  • Arnim Kuhn, 2005. "A CGE analysis of trade costs in the Russian agrofood sector," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 79-90, July.
    • Handle: RePEc:bla:agecon:v:33:y:2005:i:1:p:79-90
    DOI: 10.1111/j.1574-0862.2005.00117.x
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    File URL: https://doi.org/10.1111/j.1574-0862.2005.00117.x
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    1. Berkowitz, Daniel & DeJong, David N., 1999. "Russia's internal border," Regional Science and Urban Economics, Elsevier, vol. 29(5), pages 633-649, September.
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    5. James R. Melvin, 1985. "The Regional Economic Consequences of Tariffs and Domestic Transportation Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 237-257, May.
    6. Guriev, Sergei & Andrienko, Yuri, 2003. "Determinants of Interregional Mobility in Russia: Evidence from Panel Data," CEPR Discussion Papers 3835, C.E.P.R. Discussion Papers.
    7. Barry K. Goodwin & Thomas J. Grennes & Christine McCurdy, 1999. "Spatial price dynamics and integration in russian food markets," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 3(2), pages 157-193.
    8. Oliver E. Williamson & Scott E. Masten (ed.), 1995. "Transaction Cost Economics," Books, Edward Elgar Publishing, volume 0, number 594.
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