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.


Issue Date:
2015
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/210101
Total Pages:
36
JEL Codes:
F12; L11; Q18
Series Statement:
15-11




 Record created 2017-04-01, last modified 2017-08-28

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