Epsilon Archive for Student Projects

Abstract

Sweden joined the European Union as a member in 1995 resulting in adapting the EUs Common Agricultural Policy and accessing the European common market removing trade barriers for agricultural goods among others. To understand whether an EU membership has had an effect on Swedish production of cereals, specifically wheat and oats, this research applies a Causal-ARIMA model. The model’s dependent variable is Production in tonnes and the control variables utilized are Producer Price Index, Temperature, and Precipitation. This results in two models, one for each grain. This is then put in to the context of the Ricardian theory of comparative advantage. Previous studies which have examined the impact of the EU on Sweden have had different focuses: self-sufficiency ratio, productivity, and net benefits. None of these studies have examined production, which is the primary focus of this paper.

The results show that wheat has been positively affected by the membership while production of oats has decreased due to it. According to the Ricardian theory resources will be reallocated from less competitive crops towards more competitive crops. Swedish wheat production can therefore be seen as having a comparative advantage in relation to Swedish oats production.