The Summary and Analysis of ‘Domestic Trade Frictions and Agriculture’ Research Paper: A Review

Abstract

This paper assessed the research study carried out by Sebastian Sotelo which is entitled ‘Domestic Trade Frictions and Agriculture’. This paper summarized and analysed the process, steps and approach Sotelo utilised to formulate his model to investigate the association among trade, productivity as well as the welfare in the Peruvian agriculture sector. The paper reviews Sotelo’s paper entitled ‘Domestic Trade Frictions and Agriculture’ by first summarising and then analysing his study. The review finds that Sotelo’s model is academic and not applicable in real life. The weaknesses and gaps identified in Sotelo’s study are highlighted and include: the assumption that agricultural inputs are all imported from other foreign countries which is not the case in some developing countries; the utilisation of quantitative method and secondary data; the reliance on the estimates; the use of data that is outdated in some cases; the utilisation of the condemned trade cost (iceberg) formula; the assumption that all farmers are homo economicus which most recent studies have proved to be wrong and; application and adoption of constant return to scale which economists have condemned. This paper concludes and recommends that future studies should take advantage of the identified weaknesses and gaps this paper has identified and then explore further to cover the gaps by employing different research methods.