The effect of organic price premia and equivalence agreements on select organic imports into the United States

Abstract

This thesis estimates a gravity trade model using new USDA organic trade data and domestic organic and conventional prices for wheat, corn, and soy. The study empirically analyzes the effect of equivalence agreements on imports of these commodities into the US. Further, the price premium of organic goods is used to proxy for restrictiveness of domestic organic supply. The Poisson model estimation results are generally consistent with theory. Organic imports into the United States are positively associated with exporter income and exporter population, and negatively associated with distance. The coefficient estimate for the price ratio indicates that as domestic prices for organic corn, soy, or wheat rise relative to the conventional substitute, the US increases imports. The effect of equivalence agreements cannot be directly measured using the data available.