Abstract
This paper investigates the direction of the prima facie causal relationship between world price variability and protectionism in two agricultural sectors. Parametric and non-parametric causality tests involving an unanticipated measure of world price variability are performed and compared. The results of the tests reflect the fact that the nature of government intervention in agriculture varies across sectors and countries. As argued by Holmes and Hutton (1990), the non-parametric approach is efficient in identifying weak causal relations and is especially convenient when parametric causality tests based on different functional forms generate different results. Also, the effect of protectionism on world price variability is either insignificant or positive and as such contrasts with the ambiguity suggested by recent theoretical developments. Copyright 1993 by MIT Press.
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