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Agricultural Prices, Selection, and the Evolution of Food Industry

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  • Gaigne, Carl
  • Le Mener, Leo

Abstract

In this paper, we set up a simple model that explains the relation between low input price, high exit rates and industrial oncentration. More precisely, we argue that falling input prices force firms with low productivity to exit and induce expansion of more efficient incumbents at the expense of less productive producers. Our model helps reconcile some well‐established empirical results regarding the food processing industry. Indeed, agricultural prices have been declining between the early 1900s until 2006 while, over the same period, concentration and firm productivity have been increasing in the agri‐food industry.

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File URL: http://purl.umn.edu/125221
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Bibliographic Info

Paper provided by Structure and Performance of Agriculture and Agri-products Industry (SPAA) in its series Working Papers with number 125221.

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Date of creation: Jun 2012
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Handle: RePEc:ags:spaawp:125221

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Web page: http://servsas.fsaa.ulaval.ca/index.php?id=12482&L=1

Related research

Keywords: Input price; Downstream industry; Entry/exit; Industrial concentration; Firm heterogeneity; Agricultural and Food Policy; Industrial Organization; International Relations/Trade; D24; L11; L25; L66;

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  1. Chevassus-Lozza, Emmanuelle & Gaigne, Carl & Le Mener, Leo, 2012. "Does input trade liberalization boost downstream firms’ exports? Theory and firm-level evidence," Working Papers 126946, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  2. Pinelopi K. Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2008. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," NBER Working Papers 14416, National Bureau of Economic Research, Inc.
  3. Boyan Jovanovic & Chung-Yi Tse, 2010. "Entry and Exit Echoes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 514-536, July.
  4. Kasahara, Hiroyuki & Lapham, Beverly, 2013. "Productivity and the decision to import and export: Theory and evidence," Journal of International Economics, Elsevier, vol. 89(2), pages 297-316.
  5. Pinelopi Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2009. "Trade Liberalization and New Imported Inputs," American Economic Review, American Economic Association, vol. 99(2), pages 494-500, May.
  6. Munisamy Gopinath & Terry L. Roe & Mathew D. Shane, 1996. "Competitiveness of U.S. Food Processing: Benefits from Primary Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1044-1055.
  7. Gardner, Bruce L, 1992. "Changing Economic Perspectives on the Farm Problem," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 62-101, March.
  8. Munisamy Gopinath & Daniel Pick & Yonghai Li, 2004. "An empirical analysis of productivity growth and industrial concentration in us manufacturing," Applied Economics, Taylor & Francis Journals, vol. 36(1), pages 1-7.
  9. Amiti, Mary & Konings, Jozef, 2005. "Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia," CEPR Discussion Papers 5104, C.E.P.R. Discussion Papers.
  10. László Halpern & Miklós Koren & Adam Szeidl, 2011. "Imported Inputs and Productivity," CeFiG Working Papers 8, Center for Firms in the Global Economy, revised 16 Sep 2011.
  11. Eric Bartelsman & Stefano Scarpetta & Fabiano Schivardi, 2003. "Comparative Analysis of Firm Demographics and Survival: Micro-Level Evidence for the OECD Countries," OECD Economics Department Working Papers 348, OECD Publishing.
  12. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
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