IS "GETTING THE PRICES RIGHT" ALWAYS RIGHT? HOW TRADE LIBERALIZATION CAN FAIL

We present a general equilibrium model with oligopsonistic market structure in one of the sectors. Buyers of inputs can set the price of inputs by being involved in rent seeking activities. The framework developed is applied to the Bulgarian economy in particular to the agro-food chain. From the application to the Bulgarian economy we find that if there are market imperfections, such as oligopsonistic behavior in the economy, there are no significant welfare gains from free trade. Significant welfare gains from trade are observed only when a competitive structure prevails. We show that eliminating this market imperfection can bring important welfare implications and an efficient reallocation of resources.


Issue Date:
2000
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/12970
Total Pages:
25
Series Statement:
Bulletin 00-1




 Record created 2017-04-01, last modified 2017-08-23

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