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

Speaker

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.

Author

Lucas Zavala (Yale University, USA)

Room

Virtually via Gotomeeting
If interested, please send an Email to kcg-conference@ifw-kiel.de to receive a Gotomeeting-Link to the seminar.