Changing Patterns of Trade and its Implication on Prices

Extensive and Intensive Margins of Indias Pulses Trade By Akshay Bhatnagar, Raj Chandra and Devesh RoyInternational Food Policy Research InstituteNew Delhi-June 1, 2016

Background

Intensive and extensive margin of trade intensive margin (more imports of established pulses from traditional partners) or through the extensive margin (new trade flows in new products and/or from new partners)?Yellow pea is a perfect example of expansion on the extensive margin first later expansion on the intensive margin Emergence of African partners that is still evolving another basis for extensive marginDeepening of markets with Myanmar for example a case of intensive margin

Extensive and intensive margin and gains from tradeTrade enables the exploitation of comparative advantageProducers can thus reduce costs, increase scale of production, improve productivity and increase producer surplus. On the import side, welfare in enhanced through consumption of lower priced goods and through the availability of a larger variety of goods (OECD 2012).

Research questions addressed Dynamic behavior of Indias pulse importsHas the source of growth been the intensive margin of trade or extensive marginHas the relative roles of margins vary across pulses?Did the period of 2008 food price crisis bring about change in the margins in trade?In gravity model estimation which country fixed effects are associated with extensive margin and intensive margin respectively?

About Data SetStudy is based on a highly disaggregated 8 digit customs data Novel part of the studySeveral details disaggregated variety, landing ports, trading partners, entry timingData contains information on both volume and value of pulses export and import, destination as well as source country.

Pulses Aggregate Import

Roy, Devesh (IFPRI) (RD) - Raj can we really take 2000 imports to start from origin i.e. equal 0.Pulses Imports- Some Stylized FactsIndia imports many pulses -mainly peas, chick peas, tur, black matpe and lentils.There has been significant variation in the share of different varieties in total imports.Peas which had only 17.7% share in total imports in 2001 has increased to 50% in 2010. Chick Peas with the highest share covering the one fourth of total import in 2001 (24.29%) has decreased to 3.73% in 2010.Share of tur, black matpe and moong has also declined over the period of time but that of lentils and beans has increased by very small amount.

Chick Peas

Black Matpe Imports

Pigeon Pea

Evolution of Trade across Variety over Time

Major Trading Partners for different VarietiesPeasCanadaPigeon PeaMyanmarChick PeaAustraliaBlack MatpeMyanmarGreen GramMyanmarLentilsCanada

Evolution of Trading PartnersYear 2001Year 2005

Evolution of Trading Partnersyear 2012

Measurement of extensive and intensive margin

Behavior of margins over time

Extensive and intensive margin during shocks

Extensive margin during shocks changes - case of chick peas with more diverse set of producers

Margins in pigeon pea

Is Lentils different? Lentils is the most highly traded pulse in the world

Margins in Lentils trade

Yellow pea- the start up of EM across varieties

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Has the intensive margin been driven by increase in prices?

Intensive margin in terms of unit values

Simple gravity model estimates of extensive and intensive marginsEstimation of equation whether there is trade or not for extensive marginLevel of trade for intensive margin

Gravity model estimates for pigeon peaOur interest country fixed effects They account for multilateral resistance but also indicate likelihood of country joining in or dropping outLevel equation captures the contribution of the country higher or lower relative to the benchmark

ResultsGlobal production share a strong determinant of both extensive and intensive marginsCanada, China, Kenya, Malaysia, Mozambique, Myanmar, Tanzania have contributed positively to the extensive margin with a significant likelihood of tradingEthiopia, Ukraine, Thailand, Nigeria,Mexico significant negative likelihood of joining in

Results for intensive marginChina, Ethiopia, Mozambique, Thailand, Ethiopia, Tanzania contributed significantly to the expansion along the intensive margin

Conclusions and policy implicationsMargins are important for trade policyBigger expansion in trade has happened from intensive marginSignificant increase in prices contributing to intensive marginYellow pea presents the case where low elasticity of substitution leads to greater extensive marginThere are pulses where extensive margin is picking up or has been significantReliance on trade less fraught with risks thereBased on the interplay of margins the trade policy stance has to be at more granular level