Country size and cereals self-sufficiency

pattern and sources of the scale effect at the country-level

Abstract

We investigated the influence of country size on the cereals self-sufficiency ratio. The primary research task was to clarify the details and sources of the scale effect at the country-level, which were not presented in precedent studies. We employed a cross-country analysis using the country-level aggregated data of 157 countries in the period ranging from 1994-98. Population appears to be an appropriate proxy of country size in analyzing the determinants of the cereals self-sufficiency ratio. A regression analysis of the self-sufficiency ratio clarifies that population contributes positively to the self-sufficiency ratio, while controlling for arable land per capita and GDP per capita. While controlling for explanatory variables other than population, in the regression analysis noted above, the partial correlation analysis revealed that large countries achieve a high self-sufficiency ratio with a pattern similar to import substitution; the pattern involves production increase by land-saving, while ensuring the same level of supply per capita as that of small countries. It is also revealed that (i) the scale effect is external at the country-level; (ii) the scale effect promotes self-sufficiency; (iii) the scale effect does not contribute to a competitive advantage;and (iv) transportation cost is not the primary cause of the scale effect. These features of the scale effect suggest policy intervention, especially agricultural support. In fact, using another dataset of 26 countries in the period ranging from 1982-87,the regression analysis of agricultural support (%PSE of cereals) reveals a positive partial correlation between population and %PSE. Our results do not correspond with what is generally considered as the sources of the country-level scale effect in international trade economics. We interpret them as given below. A larger country faces a stricter supply constraint in the international cereals market; the supply constraint on imports and the security-related concern increase self-sufficiency orientation; and self-sufficiency orientation is reflected in a higher agricultural support level.