Two-way trade in (almost) homogenous products has ambiguous welfare effects if entry is restricted. We examine Swedish imports of bottled water to investigate whether transport cost losses from trade outweigh the partial equilibrium gains from trade (stronger competition and more brands to choose from). Using monthly data for all brands sold in stores during 1998-2001 we estimate a structural model of demand. Assuming one-shot Bertrand competition by multibrand firms, we can use the estimated model to uncover marginal costs. We stimulate the effect on consumer and producer surplus of banning imports, finding the banning imports would decrease overall welfare. Expanded choice is the main benefit of trade and disregarding his the net welfare effect of imports in this market are approximately zero - the pro-competitive effect is of the same size as the cost savings associated with replacing foreign, higher cost, suppliers with domestic. Given our choice of market this suggests we should not be overly concerned with the welfare effects of two-way trade in consumer goods that are close to homogenous.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
599.
Length: 31 pages Date of creation: 24 Jun 2003 Date of revision: Handle: RePEc:hhs:iuiwop:0599
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden Phone: +46 8 665 4500 Fax: +46 8 665 4599 Email: Web page: http://www.ifn.se/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Elisabeth Gustafsson).
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Did you know? You can include your works in the database easily by uploading them on the Munich Personal RePEc Archive (MPRA) if you do not have access to an institutional RePEc archive.