Welfare impact of wheat export restrictions in Argentina: Non-parametric analysis on urban households

Abstract

The Argentine wheat value chain was subject to considerable policy interventions during the last decade. The measures adopted by the government included export duties from 2002 onward, quantitative wheat export restrictions since 2006, and domestic price ceilings and subsidies introduced in 2007. These policy instruments aimed to limit the increase in domestic prices of cereals during a period of high international prices and to keep an adequate provision of grains in the domestic market. Export restrictions implicitly intended to avoid an increase in the prices of basic consumption goods derived from wheat. However, these non-tariff measures could also distort farmers’ incentives to produce. Using non-parametric techniques, this study contributes to the policy discussion of the effects of non-tariff measures in the cereals market by evaluating the welfare impact of wheat export restrictions on Argentine urban households. Focusing on the effects of changes in prices of final consumption goods during 2006–2011, the study finds that prices of wheat derivatives would be only 1 per cent higher in the absence of quantitative restrictions, with negligible welfare effects on consumers. If both export restrictions and subsidies to millers were removed, prices would be 6.4 percent higher. This would imply modest welfare losses ranging from zero to 1.5 percent, mainly affecting the poorest households.