Premium
Agricultural trade liberalization and economic development: the role of downstream market power
Author(s) -
Sexton Richard J.,
Sheldon Ian,
McCorriston Steve,
Wang Humei
Publication year - 2007
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/j.1574-0862.2007.00203.x
Subject(s) - downstream (manufacturing) , liberalization , market power , economics , developing country , free trade , international economics , agriculture , competition (biology) , value (mathematics) , international trade , trade barrier , business , market economy , economic growth , operations management , machine learning , computer science , biology , monopoly , ecology
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.