Trade liberalisation effects on agricultural goods at different processing stages

Abstract

A two-stage gravity-based model is used to explain cattle and beef bilateral trade flows between 42 countries. The model parameters are estimated using a double-hurdle model with a multivariate sample selection procedure. The parameter estimates are used to simulate probabilities of new trade flows and the increase in existing trade flows following reductions in import tariffs, export subsidies and domestic support. The results show that adjustments in beef exports occur at both the extensive and intensive margins. Full liberalisation would entail adjustments in the extensive margins for developing economies that are about six-fold the adjustments under partial liberalisation.