Does Trade in Primary Commodities Matter?
Thibault Fally and James E. Sayre
Geopolitical instability and a burgeoning demand for critical resources have made understanding the role of international trade in primary commodities ever more important. While the share of primary commodities (mineral, fuel, and agricultural products) in world trade has declined over the past century, they play an essential role in global value chains and are particularly vulnerable to trade wars and tariffs. Here, we argue that the aggregate welfare gains from trade are much larger than previously hypothesized when we account for key features of commodities, such as difficulty in finding substitutes and in increasing supply, and high dispersion of natural resources across countries.
Multi-stage production, elasticities of commodities
Thibault Fally and James E. Sayre. "Does Trade in Primary Commodities Matter?"
ARE Update 23(1)(2019):5-8. University of California Giannini Foundation of Agricultural Economics.