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The Impact of US Subsidies on the World Cotton Market: A Reassessment

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  • Ben Shepherd

    (Groupe d'Économie Mondiale)

Abstract

Following a critical review of the existing quantitative literature on cotton subsidies, a vector autoregression (VAR) is used to model the effects of US subsidies on the world cotton market from 1965 to 2001. Surprisingly, subsidies are found to have only a limited impact on prices despite their effects on production and consumption. The dynamic relationships between quantities, prices, stocks and subsidies are found to be considerably more complex than those suggested by basic theory. Finally, simulation results indicate that even large reductions in US subsidies will not necessarily lead to significantly higher world prices.

Suggested Citation

  • Ben Shepherd, 2005. "The Impact of US Subsidies on the World Cotton Market: A Reassessment," International Trade 0511012, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0511012
    Note: Type of Document - pdf; pages: 42
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    References listed on IDEAS

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    Cited by:

    1. Shepherd, Ben, 2006. "Estimating Price Elasticities of Supply for Cotton: A Structural Time-Series Approach," MPRA Paper 1252, University Library of Munich, Germany.
    2. Blasco, Lorea Barron & Devadoss, Stephen & Stodick, Leroy, 2006. "The Doha Round Declaration on Cotton: A Catalyst for Poverty Reduction in Africa?," 2006 Annual meeting, July 23-26, Long Beach, CA 21161, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    More about this item

    Keywords

    Vector Autoregression; Subsidies; World Prices; Cotton Market;
    All these keywords.

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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