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Pesticide Regulation and Pesticide Prices

Author

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  • David Freshwater
  • Cameron Short

Abstract

Pesticides are an increasingly important input in crop production. In North America there has been a longstanding concern by farmers in close proximity to the Canada–U.S. border that either differences in access to compounds or price differentials adversely affect competitive positions. Past analysis of this issue has tended to assume a simple arbitrage process, if borders are opened, that leads to prices falling to the lower price. By contrast, we examine the possibility for systematic price discrimination by pesticide manufacturers. Under this model an open border may lead to price arbitrage, but not at the lower price. Further, we show that while aggregate social welfare gains from removing price discrimination are possible, they may be small. Further, component welfare changes to manufacturers and farmers in each country are large and conflicting, which suggests there will likely be opposition from some groups to more open borders. Les pesticides sont un intrant de plus en plus important en production végétale. En Amérique du Nord, les producteurs situés à proximité de la frontière canado‐américaine partagent depuis longtemps l'inquiétude voulant que l'accès aux pesticides ou les écarts de prix affectent défavorablement leurs positions concurrentielles respectives. Les analyses antérieures ont eu tendance à supposer qu'advenant une ouverture des frontières, il y aurait un processus simple d'arbitrage qui ferait en sorte que les prix chuteraient au niveau le plus bas. En revanche, nous avons examiné la possibilité que les fabricants de pesticides exercent une discrimination systématique des prix. Ce modèle montre que l'ouverture des frontières peut mener à l'arbitrage des prix, mais pas au niveau le plus bas. De plus, nous montrons que bien qu'il soit possible que le bien‐être collectif augmente à la suite de discrimination par les prix, cette augmentation pourrait être faible. Finalement, les changements dans la composition du bien‐être des fabricants et des producteurs de chaque pays sont importants et conflictuels, ce qui porte à croire que certains groupes pourraient s'opposer à une ouverture accrue des frontières.

Suggested Citation

  • David Freshwater & Cameron Short, 2005. "Pesticide Regulation and Pesticide Prices," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(2‐3), pages 193-219, June.
  • Handle: RePEc:bla:canjag:v:53:y:2005:i:2-3:p:193-219
    DOI: 10.1111/j.1744-7976.2005.00400.x
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    References listed on IDEAS

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    1. Taylor, Richard D. & Koo, Won W., 2001. "United States And Canadian Agricultural Herbicide Costs: Impacts On North Dakota Farmers," Agribusiness & Applied Economics Report 23634, North Dakota State University, Department of Agribusiness and Applied Economics.
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    Cited by:

    1. Takechi, Kazutaka & Higashida, Keisaku, 2012. "Firm organizational heterogeneity and market structure: Evidence from the Japanese pesticide market," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 193-203.

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