Unfair Trade? Market Power in Agricultural Value Chains — Lucas Zavala

Sprecher

Lucas Zavala (Yale University, USA)

Abstract

I show that exporter market power prevents farmers from benefiting from international trade. Using microdata from Ecuador, I link exporters to the farmers who supply them across the universe of cash crops. I document that farmers earn significantly less when they sell crops in which export markets are highly concentrated. I propose a model in which farmers choose a crop to produce and an exporter to supply. Exporter market power is driven by two key elasticities, which govern heterogeneity in farmer costs of switching crops and switching exporters. I develop a method to estimate them using exporter responses to international price shocks. The estimates imply that farmers earn half of their marginal revenue product as a result of market power. I evaluate the effectiveness of agricultural support policies in this setting. Fair Trade emerges as a practical tool for fighting market power and helping farmers share in the gains from globalization.

Autor

Lucas Zavala (Yale University, USA)

Raum

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