We examine how diversification in import sourcing moderates resilience to upstream shocks, focusing on two specific but recurrent risks: pandemics and geopolitical conflicts. Using annual data on global trade and weekly data from Swiss importing firms, we assess how diversification before an upstream shock affect the growth rate of imports at the product level. Guided by a theoretical framework that introduces risk aversion into global sourcing, we estimate a reduced-form gravity model and report two sets of empirical findings. First, we establish that both shocks significantly reduce the growth rate of imports. Second, using various diversification measures defined at the importer-product level as proxies for risk aversion, we show that more diversified firms, reflecting greater risk aversion, exhibit greater resilience to these disruptions. Specifically, importers with higher pre-shock source diversity show lower declines in import growth during a shock. That the results align across macro and micro levels enhances the external validity of our findings and positions diversification as a scalable resilience strategy.
Recent shortages and price volatility have exposed vulnerabilities in international agri-food value chains. This paper develops a new framework for measuring trade diversification based on Hill numbers, which capture both the extensive and intensive margin of trade connections. Using UN COMTRADE data for 188 countries from 2000 to 2022, I first document global patterns of diversification and concentration across agri-food sectors. The descriptive evidence shows that most countries trade with many partners in principle, yet effectively rely on only a few, especially for grains and oilseeds. I then estimate the effect of import and export diversification on within- year food price volatility using a shift–share instrumental-variable design that ex- ploits exogenous foreign sector-level shocks weighted by lagged bilateral trade ex- posure. The empirical results show that more balanced and diversified import port- folios are strongly associated with lower food price volatility, whereas export diver- sification plays a more limited role. Policies encouraging diversification can mitigate fragility but involve trade-offs between efficiency from international specialization and resilience of the input-output network.
Risks are inherent and increasingly recognized in global agricultural value chains; however, their effects and firm-level responses are poorly understood. Using novel global firm-to-firm trade data, we show that agricultural markets are highly concentrated and have sparse network structures, with buyers typically relying on a limited set of suppliers, and prices are shaped by the two-sided market power of both importers and exporters. We find that U.S. import prices are lower when importers account for a larger share of purchases, and that price volatility is reduced when firms diversify their foreign suppliers, for example, in response to the Ukraine-Russia war. Motivated by these findings, we develop the first structural model of international sourcing under matching frictions and risk aversion applied to agricultural markets and global agricultural value chains. In this model, agri-food firms adjust along three margins: absorbing shocks, renegotiating with existing suppliers, or diversifying by switching to new suppliers. The relative importance of these adjustment strategies depends on relative Ricardian comparative advantage, risk aversion, and matching friction correlation across countries. Our simulated supply chain disruption counterfactual exercises show that policies promoting import-source diversification and reducing matching frictions enable importers to access new suppliers and help stabilize agricultural prices, especially with a more competitive upstream market structure.
Food has long been a policy instrument in times of conflict and political crisis. As a necessity, food can be used to advance geopolitical goals, including projecting state power and ensuring national security. We review the literature at the intersection of agricultural economics and political science, examining how food policy can further geopolitical interests. We bridge the gap between distinct literatures in agricultural economics and political science by synthesizing extant research on how state power and national security concerns shape global food policy and identify directions for future research. By linking fragmented analyses of contemporary events with historical and theoretical perspectives, we highlight how geopolitical uncertainty continues to influence food policy. Given recent geopolitical developments, agricultural economics must integrate geopolitical risk into its research agenda, which will help define the role of agricultural economists within the emerging field of geoeconomics.