Trade policy and endogenous product differentiation: An application to disaggregate food manufacturing industries
Abstract
There has been a paucity of literature which has examined the effects of trade policy on imperfectly competitive manufacturing industries in the presence of intermediate inputs. In addition, the effects of trade policy on the food manufacturing sector has been neglected in the trade literature. The objective of this thesis is to integrate trade policy, intermediate inputs, and imperfect competition into a coherent framework suitable for the analysis of trade policy effects on the food processing sector. An analytical model is developed and used to conduct various policy experiments. The imposition of intermediate input tariffs leads to a decline in output per firm and the number of firms in the country imposing the tariff. When this tariff is combined with a tariff on final products, the effects on the number of firms is ambiguous and depends on the degree of tariff escalation. The model is applied empirically to assess the effects of trade reform on disaggregate food manufacturing industries. The initial markup level and the cost share of intermediate inputs are found to be important factors in determining the extent of adjustment resulting from the policy shock. In addition, the input tariff effects dominate the output tariff effects in determining the outcome of trade reform in the food processing sector.
Degree
Ph.D.
Advisors
Hertel, Purdue University.
Subject Area
Agricultural economics
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