Economics of export subsidies under costly and imperfect enforcement

The present paper builds on the published literature on agricultural policy analysis under costly and imperfect enforcement by introducing enforcement costs and misrepresentation into the economic analysis of export subsidies. Specifically, the present paper examines the economic causes of cheating on export subsidies and the consequences of enforcement costs and misrepresentation for the welfare effects and the transfer efficiency of this policy instrument. Policy design and implementation is modelled as a sequential game between a government that designs and enforces the policy and the recipients of the payments. Two alternative policy implementation scenarios are considered. In the first scenario, export subsidies are paid to private trading firms while in the second scenario subsidies are paid directly to the producers of the subsidised commodity. Analytical results show that the introduction of enforcement costs and cheating changes the welfare effects of export subsidies and their efficiency in redistributing income to producers. The analysis also shows that, contrary to what is traditionally believed, the incidence of export subsidies depends on the group that is subsidised to export the surplus quantity – the way the policy is implemented. The results provide additional support for the contention that the economic consequences of cheating are highly policy-specific. Finally, the analysis reveals that when the government faces restrictions on either the volume or the value of export subsidies, cheating reduces the distortionary effects of the policy on international markets. This is true irrespective of whether subsidies are paid to trading firms or to producers.International Relations/Trade,

Agricultural cooperatives and quality-enhancing R&D in the agri-food system

This paper develops a game - theoretic model of heterogeneous consumers to analyze the effect of cooperative involvement on quality- enhancing product innovation activity, the pricing of food products, and the welfare of the groups involved in the context of a mixed duopoly where an openmembership consumer co- op competes with an IOF. Analytical results show that the involvement of the member welfare- maximizing co- op in R&D can be quality and welfare enhancing by increasing the arrival rate of product innovations and reducing the prices of food products. The effectiveness of the co- op is shown to depend on the nature of product differentiation and the relative quality of its products, the degree of consumer heterogeneity, and the size of innovation costs .Open Membership Cooperatives, Product Innovation, Mixed Oligopoly, Retained Earnings., Agribusiness, Research and Development/Tech Change/Emerging Technologies,

AGRICULTURAL BIOTECHNOLOGY AND ORGANIC AGRICULTURE: NATIONAL ORGANIC STANDARDS, LABELING AND SECOND-GENERATION OF GM PRODUCTS

This paper examines the effect of the introduction of labels for products of biotechnology on the markets for GM, conventional, and organic food products. In addition, the paper analyzes the market and welfare effects of the introduction of consumer-oriented, second-generation GM products. Analytical results show that while a no-labeling regime is generally beneficial for the organic sector, when segregation costs are sufficiently high the introduction of labels for GM products can enhance the consumption share and growth of the organic sector while driving the conventional products out of the market. The analysis also reveals that the introduction of the consumer-oriented GM products can change the nature of the relationship between GM and conventional and organic products from one of vertical to one of horizontal product differentiation and can enhance both consumer welfare and the market acceptance and growth of agricultural biotechnology. When the value consumers place on the new product is sufficiently high, the introduction of the consumer-oriented GM products can drive the first-generation of GM products and their conventional counterparts out of the market while reducing the consumer demand for organic food. Overall, the market and welfare effects of GM labeling and the introduction of the consumer-oriented GM products are determined by the size of marketing and segregation costs under labeling of GM products, the level of consumer aversion to genetic engineering, the production share of the GM product in the no-labeling case, the structure of the agricultural biotechnology sector, and the benefits consumers perceive from the second-generation of GM products.Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies,

THE EFFECT OF MARKETING COOPERATIVES ON COST-REDUCING PROCESS INNOVATION ACTIVITY

This paper examines the market and welfare effects of cooperative involvement in cost-reducing process innovation activity in the context of a mixed oligopsony where an open-membership marketing co-op competes with an IOF. The presence of the marketing co-op is shown to result in increased producer prices and welfare gains for all farmers, members and non-members of the co-op. The effect of the marketing co-op on process innovation activity depends on the relative quality of its final products, the degree of producer heterogeneity, and the size of innovation costs.Agribusiness,

Regulation and Trade of GMOS

This paper analyzes the strategic effects of national regulatory decisions on labeling of GM products and identifies the determinants of the noncooperative Nash equilibrium labeling regimes in a small number of producing countries that have adopted the GM technology. Analytical results show that the equilibrium labeling regimes depend on (i) the distribution of consumer preferences and the level of consumer aversion to GM products; (ii) the segregation and labeling costs in these countries; (iii) the relative productive efficiency and the cost effectiveness of the GM technology; (iv) the structure of the trading sector; (v) the market power of the life science companies; and (vi) the strength of intellectual property rights in these countries.International Relations/Trade,

STRATEGIC LABELING AND TRADE OF GMOS

This paper systematically analyzes the strategic effects of national regulatory decisions on labeling of GM products and identifies the determinants of the non-cooperative Nash equilibrium labeling regimes in a small number of producing countries that compete for access in the world market for an agricultural product.Research and Development/Tech Change/Emerging Technologies,

Coexistence of Genetically Modified, Conventional and Organic Food Products

The coexistence of genetically modified (GM) products with their conventional and organic counterparts has been one of the most scrutinized issues surrounding the introduction of products of agricultural biotechnology into the agri-food marketing system. Fears that the widespread adoption of GM products will drive their conventional (and perhaps organic) counterparts out of the market, have been countered by arguments that their presence enhances the equilibrium product variety in the market. Central to the argument is, of course, the possibility of coexistence of GM, conventional and organic products, with the main focus having been on farm production systems and the prospect of coexistence of GM, conventional and organic crops

THE EFFECT OF COOPERATIVES ON PRODUCT INNOVATION IN THE AGRI-FOOD SYSTEM

This paper develops a game-theoretic model of heterogeneous consumers to analyze the effect of cooperative involvement on quality-enhancing product innovation activity, the pricing of food products, and the welfare of the groups involved in the context of a mixed duopoly where an openmembership consumer co-op competes with an IOF. Analytical results show that the involvement of the member welfare-maximizing co-op in R&D can be quality and welfare enhancing by increasing the arrival rate of product innovations and reducing the prices of food products. The effectiveness of the coop is shown to depend on the nature of product differentiation and the relative quality of its products, the degree of consumer heterogeneity, and the size of innovation costs.cooperatives, product innovation, mixed oligopoly, retained earnings, Agribusiness,

Accounting for Agent Heterogeneity in Market and Policy Analysis

doi:10.13014/K2416V8V This book presents a multi-market framework of market and policy analysis that explicitly accounts for the empirically relevant heterogeneity in consumer preferences and producer characteristics. The explicit consideration of consumer and producer heterogeneity represents a significant departure from the representative consumer and producer that have been at the center of most of the literature on market and policy analysis, and enables the distributional impacts of changes in market conditions and policies to be fully identified. The framework is used to analyze the system-wide market and welfare impacts of a number of changes in market conditions (like changes in consumer preferences, costs and market structure) and policies (like subsidies and taxes) on one of the products in the system. Consistent with a priori expectations, the use of the framework unveils impacts masked by the conventional market and policy analysis.https://digitalcommons.unl.edu/zeabook/1069/thumbnail.jp

Consumption effects of genetic modification: what if consumers are right?

This paper develops a model of differentiated consumers to examine the consumption effects of genetic modification (GM) under alternative labeling regimes and segregation enforcement scenarios. Analytical results show that if consumers perceive GM products as being different than their traditional counterparts, genetic modification affects consumer welfare and, thus, consumption decisions. When the existence of market imperfections in one or more stages of the supply chain prevents the transmission of cost savings associated with the new technology to consumers, genetic modification results in welfare losses for consumers. The analysis shows that the relative welfare ranking of the “no labeling” and “mandatory labeling” regimes depends on: (i) the level of consumer aversion to genetic modification, (ii) the size of marketing and segregation costs under mandatory labeling; (iii) the share of the GM product to total production; and (iv) the extent to which GM products are incorrectly labeled as non-GM products.Genetically modified foods Economic aspects., Consumers., Consumption (Economics),