Can a Cereal Export Ban Affect a Net Food-Importing Economy? The Case of Ethiopia

Abstract

Most governments implemented policies designed to offset the expected negative effects of high food prices of 2007/08 and 2010/11. Among other interventions, net food-importing countries, such as Ethiopia, have introduced a cereal export ban. Several studies have investigated the macroeconomic impacts of export bans on large net exporters of grains. However, only very few country case studies have examined the economy-wide and distributional effects combined. Further, there is a lack of rigorous studies that disentangle the net impact of a cereal export ban when an economy is jointly affected by an external price shock. This paper evaluates the impacts of a border price shock followed by a cereal export ban, and cereal export ban alone in a typical net food-importing country, Ethiopia. Results show that border price shocks can have negative production and supply effects on food, causing strong welfare losses on urban households. However, an export ban can stabilise domestic food prices in the short-run, but cannot erase the price hike. Moreover, the ban discourages cereal production, and reduces rural households’ welfare. As expected, a cereal export ban alone can push domestic food prices down and lead to welfare loss for rural households and the society as a whole while urban households benefit.