Working Paper Revision

Trade Risk and Food Security

Abstract: International trade provides critical access to food, yet many food-importing countries protect agriculture even where productivity is low. We study how the risk of trade disruptions shapes food security, the global distribution of production, and optimal policy. We document that reliance on imported staples is linked to higher food insecurity, particularly in poorer countries. Exploiting the Ukraine–Russia war, we find that districts in Ethiopia more exposed to disrupted imports suffered sharper declines in food security. We develop a multi-sector model of trade with stochastic trade costs and non-homothetic preferences. Uncertainty over trade costs induces a risk–return trade-off in sourcing, leading importers to reallocate toward domestic production or more reliable partners. Quantitatively, food importers retreat most from trade, reallocate resources to agriculture, and face higher food insecurity. We analytically characterize and quantify optimal agricultural protection as insurance against unreliable imports. Productivity growth can substitute for protection by reducing exposure to risk.

JEL Classification: E10; F10; F60; I30; O11; O41;

https://doi.org/10.20955/wp.2024.004

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2025-10-30

Number: 2024-004

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