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Is 'Getting The Prices Right' Always Right? How Trade Liberalization Can Fail

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Author Info
Gaitan, Beatriz
Pavel, Ferdinand
Abstract

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.

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Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2000 Annual meeting, July 30-August 2, Tampa, FL with number 21881.

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Date of creation: 2000
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Handle: RePEc:ags:aaea00:21881

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Related research
Keywords: Imperfect Competition; Oligopsony; International Trade; Growth and Development; Transition Economies; International Relations/Trade; D34; E13; F12; L16;

References listed on IDEAS
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  1. Patrick J. Kehoe & Timothy J. Kehoe, 1994. "A primer on static applied general equilibrium models," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-16. [Downloadable!]
  2. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos A, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 45-66, Spring. [Downloadable!] (restricted)
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  3. Xinshen Diao & Terry L.Roe & Erinç Yeldan, 1996. "A Simple Dynamic Applied General Equilibrium Model of a Small Open Economy : Transitional Dynamics and Trade Policy," Departmental Working Papers 963, Bilkent University, Department of Economics.
  4. Ernesto Hernández-Catá, 1997. "Liberalization and the Behavior of Output During the Transition from Plan to Market," IMF Working Papers 97/53, International Monetary Fund.
  5. Anne Marie Gulde, 1999. "The Role of the Currency Board in Bulgaria's Stabilization," IMF Policy Discussion Papers 99/3, International Monetary Fund.
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This page was last updated on 2009-12-11.


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