Projects Funded for James Sayre


Farms, Firms, and Fixed Costs: Clustering and Returns to Scale in Agricultural Exporting

Thibault Fally and James Sayre


Specific Objectives of the Project:

  • Document stylized facts regarding clustering of agricultural production and exporting in both the US and Mexico.
  • Estimate the returns to scale in exporting by crop at the regional level.
  • Develop a model which features agricultural value chains that can help explain the patterns in agricultural clustering that we observe.
  • Estimate the model and quantify the importance of clustering and returns to scale for export patterns across crops and locations.
  • Perform counterfactual analysis comparing the welfare benefits of infrastructure investment (e.g. roads) vs. more targeted investment in agricultural value chains.
  • Make quantitative comparisons between US and Mexican agricultural exporting, illuminating some of the features that govern exporting in both countries.
  • Publish the final article(s) in a top refereed journal, as well as a summary in the ARE update.

Summary of Results:
Aside from publishing the paper, all objectives have been attained. Most of the results are provided in James Sayre paper which will be made available here:


International Trade in Commodities Matters

Thibault Fally and James Sayre


Specific Objectives of the Project
-Compile data on the production, trade, input-output linkages, and supply and
demand elasticities for many commodities, including agricultural commodities; no one
has previously gathered these statistics about commodities within one dataset,
particularly one that features commodities listed at the Harmonized System level and
countries listed using a standardized code system (ISO)
- Review the vast, but highly scattered, existing literature examining the
sensitivity of supply and demand for these commodities in response to changes in prices
- Develop a general-equilibrium model of consumption, production and inputoutput
linkages to determine role of crucial primary commodities in international trade
-Quantify the welfare gains from trade and the winners and losers from the
distribution of natural resources across space
- Publish data on website so they can be used by researchers and practitioners
interested in studying the importance of price sensitivities of supply and demand for
agricultural commodities and their implications for foreign and domestic agricultural
producers and consumers, including those in California
- Publish the final article(s) in a top refereed journal, as well as a summary in the ARE update.

Project Report/Summary of Results
Primary commodities account for approximately 16 percent of world trade, yet they are
used extensively as intermediate inputs into many production processes. We show that
ignoring several key features of trade in commodities leads to a large understatement of
aggregate gains from trade despite their relatively small share of world trade. We
quantify the welfare gains from international trade when we account for specific
characteristics of most primary commodities: i) a low price elasticity of demand as a
result of difficulty in finding substitutes, ii) a low price elasticity of supply, and iii) a high
concentration of natural resources and production among a few countries. For instance,
copper is difficult to replace in the electronic equipment industry, the supply and demand
for copper vary only slightly with changes in prices, a large share of its supply comes
from Chile and copper accounts for half of Chilean total export revenues. We explicitly
account for these features in a general-equilibrium model of consumption, production,
and input-output linkages. In our simulations, we confirm that ignoring these specific
features of commodities leads to a wide understatement of the aggregate gains from trade.