Heterogeneous agrifood firms, agricultural prices and access to foreign markets

We analyze how a change in agricultural input price impacts the selection process and market shares in foreign markets for firms in the final agrifood good sector. To do so we develop a model with heterogeneous firms and intermediate good where input use is technologically constrained. We show that the effect of input price depends on labor productivity and fixed costs. Moreover, we show that a decrease in input price in all countries can decrease the probability to enter foreign markets, through export or horizontal foreign direct investment (HFDI). Finally, we show that the decrease of the intermediate good price always increases the share of HFDI relative to export, even if it can modify the HFDI-Export trade-off in favor of HFDI or export

Biens intermédiaires et commerce international avec firmes hétérogènes : développements théoriques et application au secteur agroalimentaire français

Thèse soutenue le 25 Novembre 2011 Diplôme : Dr. d'UniversitéIn this thesis, we analyze the impact of trade liberalization of intermediate goods on firms in the downstream sector, with a particular focus on the impact of agricultural trade liberalization on French agrifood firms. The contribution of this thesis is both theoretical and empirical. The theoretical framework developed here uses key points of new international trade theories, namely the heterogeneity of firms and the selection of firms in different markets due to the presence of fixed costs. To account for the link between the liberalization of inputs and the structure of the downstream industry, we introduce an intermediate good sector in a model with heterogeneous firms. This theoretical framework is then used to analyze the impact of input trade liberalization on different aspects of the final sector, such as the export performance of firms, the way they serve foreign markets (through exports or direct investment abroad), and finally the entry in and exit from the domestic market. We compare our results with firm level data on French agrifood firms validate the propositions made in the theoretical model. We show that input trade liberalization reduces the probability of in the French agrifood sector, and results in the concentration of market shares in the hands of the most productive firms. We also show that input trade liberalization forces less productive firms to exit the domestic market. Finally, we show that the effects of input trade liberalization depend on the structure of fixed costs to access markets