EXPORT SUBSIDIES AND PROFIT-SHIFTING IN VERTICAL MARKETS
By: Sheldon, Ian M.; Pick, Daniel H.; McCorriston, Steve
Sheldon, Ian M.; Pick, Daniel H.; McCorriston, Steve, EXPORT SUBSIDIES AND PROFIT-SHIFTING IN VERTICAL MARKETS, Journal of Agricultural and Resource Economics, Volume 26, Issue 1, July 2001, Pages 125-141
This study examines the interaction between export subsidies and profit-shifting in a vertical production system consisting of agricultural commodity production, and intermediate and final good processing, where the latter two stages may be characterized by imperfect competition. Using a model with general functional forms for demand, comparative statics indicate that an export subsidy to an unprocessed agricultural commodity, under certain circumstances, can have greater profit-shifting effects at the final processing stage compared to an export subsidy targeted at the final processed good.