In this paper, we consider the potential impact of market power on the likely effects of trade reform and how this may impact on developing country exporters. The emphasis is on trade reform in agricultural markets, one of the principal features of the Doha Round negotiations, and we discuss the mechanisms via which market power will matter for agricultural markets even if those markets themselves are competitive. Using results from a calibrated theoretical model, we show that the existence of downstream market power in vertical chains is likely to dissipate the potential benefits that would accrue to developing country agricultural exporters following trade reform.
Anderson, K., & Martin, W. (2006). Agriculture, trade reform and the Doha Round agenda. Washington DC: World Bank.
2.
Dixit, A.D. (1988). Optimal trade and industrial policies for the US automobile industry. In R. Feenstra (Ed.), Empirical methods for international trade. Cambridge, MA: MIT Press.
3.
Francois, J.F., Meijl, H. van, & Tongeren, F. von (2005). Gauging the WTO negotiation’s potential gains. Economic Policy, 20(42), 349–91.
4.
Harris, R.G. (1984). Applied general equilibrium analysis of small open economies with scale economies and imperfect competition. American Economic Review, 74(5), 1016–32.
5.
Harrison, A. (1994). Productivity, imperfect competition and trade reform: Theory and evidence. Journal of International Economics, 36(1–2), 53–73.
6.
Kambhampati, U., Krishna, P., & Mitra, D. (1997). The impact of trade policy reforms on labour markets: Evidence from India. Journal of International Trade and Economic Development, 6(2), 287–99.
7.
Laborde, D., Martin, W., & Mensbrugghe, D. van der (2010). Implications of the 2008 Doha draft agriculture and non-agricultural draft market access modalities for developing countries. Mimeo, IFPRI/World Bank.
8.
Levinsohn, J. (1993). Testing the imports-as-market-discipline hypothesis. Journal of International Economics, 35(1–2), 1–22.
9.
McCorriston, S., & Sheldon, I.M. (forthcoming) Tariff (de-)escalation with successive oligopoly. Review of Development Economics.
10.
Melitz, M. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–725.
11.
Messerlin, P.A. (2001). Measuring the costs of protection in Europe. Washington DC: Institute for International Economics.
12.
Schmalensee, R. (1988). Inter-industry studies of structure and performance. In R. Schmalensee and R. Willig (Eds), Handbook of Industrial Organisation. Amsterdam: Elsevier/North-Holland.
13.
Sexton, R., Sheldon, I.M., McCorriston S., & Wang, H. (2007). Agricultural trade liberalisation and economic development: The role of downstream market power. Agricultural Economics, 36(2), 253–70.
14.
Smith, A., & Venables, A. (1988). Completing the internal market in the European community. European Economic Review, 32(7), 1501–25.
