Premium
Welfare Effects of Technological Convergence in Processed Food Industries
Author(s) -
Ruan Jun,
Gopinath Munisamy,
Buccola Steven
Publication year - 2008
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.01063.x
Subject(s) - convergence (economics) , monopolistic competition , economics , welfare , competition (biology) , technological change , microeconomics , international economics , econometrics , international trade , macroeconomics , market economy , monopoly , ecology , biology
We develop a monopolistic competition model to investigate effects of international technological convergence on factor rewards, output composition, and welfare. Comparative static analysis indicates technological convergence improves the follower's—but impairs the leader's—international competitiveness. The leader's welfare improves unambiguously; the follower's welfare depends on the relative strength of convergence's income and terms‐of‐trade effects. We use data from seventeen food industries in thirty countries, 1993–2001, to test these analytical predictions. Evidence of convergence is found in thirteen of seventeen industries. Convergence lifts followers' relative wages and global value‐added shares. Followers benefit from convergence's positive income effect. Leaders benefit from higher terms of trade.