Agricultural Comparative Advantage under International Price Uncertainty: The Case of Senegal

This study draws upon recent theoretical contributions which have introduced uncertainty into trade theory to examine empirically the implications of international price uncertainty for agricultural comparative advantage in a small open economy assuming risk-adverse policy makers. Utilizing a price endogenous, linear programming model developed for Senegal, it is shown that Senegal's comparative advantage in the production of peanuts and comparative disadvantage in the production of cereals is less clearcut when international price risk is considered. The results suggest a trade strategy of less specialization in peanuts and greater self-sufficiency in cereals may be superior to free trade.