The Effect of Distortions in Relative Prices on Corn Productivity and Exports: A Cross-Country Study

This paper tests the hypothesis tliat a significant part of the observed dif­ferences in com yields among countries can be explained by differences in the corn-nitrogen price ratio. Evidence is provided that the farm level price of corn relative to the price of nitrogen fertilizer varies greatly among countires. The observed large differences reflect the price and international trade policies that exist in the respective markets for com and nitrogen fertilizer. Pooled data from 14 of the largest corn producing countries for 13 years show that the corn-nitrogen price ratio, as well as physical factors and technology, account for a significant part of the observed corn yield dif­ferences among countries. This provides evidence that policies which distort corn and fertilizer prices have a significant effect on com yields and in turn on the net trade positions of the various countries.