Agricultural trade liberalization and economic development: the role of downstream market power |
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Authors: | Richard J. Sexton Ian Sheldon Steve McCorriston Humei Wang |
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Affiliation: | Department of Agricultural and Resource Economics and Giannini Foundation of Agricultural Economics, University of California, Davis, CA 95616, USA;Department of Agricultural, Environmental, and Development Economics, Ohio State University, Columbus, OH 43210, USA;School of Business and Economics, University of Exeter, Exeter EX4 4PU, UK;California Department of Health Services, Sacramento, CA 95899, USA |
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Abstract: | A model is developed to characterize the vertically linked and concentrated nature of developed‐country food markets. This model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing‐country exporters of agricultural commodities from trade liberalization by developed countries. Results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country. The distributional effects under downstream market power differ significantly from the perfectly competitive case and may result, somewhat paradoxically, in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs. |
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Keywords: | F12 F13 O12 |
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