A large literature has been devoted to measuring and explaining the cost-effectiveness of governments’ interventions in the agricultural sector, showing that both excessive taxation and support may be detrimental for consumers’ welfare at a local level. Yet, little is known about the extent to which agricultural incentives/disincentives propagate through the international trade network, and spill over into the global economy. Against this background, we investigate whether and how policy interventions in partner countries affect domestic food security. To this aim, we develop a joint propensity score method that corrects for the bias resulting from both treatment selection and interference, and it allows estimating both direct and network effects of policy interventions in the primary sector. Our results show that commercial partners’ distortions can either boost or counteract national policies, and it is therefore crucial to assess a country’s level of trade integration when designing evidence-based policy interventions.
The international fragmentation of production processes is dramatically deepening the structural interdependence of the world economy. Recent literature has shown that global value chains are modifying countries’ incentives to impose import protection. However the complex structure of their connections entails the existence of specific direct and indirect effects that affect the price domestic suppliers receive. The aim of this paper is to show that final goods tariffs tend to decrease in the domestic content of foreign-produced final goods but at a different pace when distinguishing the direct partner country from third countries. To get the two separate contributions, we decompose the Leontief inverse matrix into its direct and indirect connections and recompute the domestic and foreign valued added content embodied in final goods. Our results show that both direct and indirect flows play a crucial role in shaping trade policy.