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An empirical test of the rent-shifting hypothesis: the case of state trading enterprises

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  • Hamilton, Stephen F.
  • Stiegert, Kyle W.

Abstract

A central result in the theoretical literature on strategic trade is the ërent-shifting hypothesisí, the idea that governmentís can employ trade policy as a precommitment device to transfer profit from foreign to domestic firms. To our knowledge, however, the rent-shifting hypothesis remains untested empirically. This paper constructs a theory-based empirical test of rent-shifting behavior that relies on observations of government precommitment variables employed through State Trading Enterprises (STEs). The analysis applies data on the delayed producer payment structure of the Canadian Wheat Board (CWB) and examines its merits as a rent-shifting mechanism in the international durum market. The model fails to reject the hypothesis that the CWB utilizes a pre-commitment mechanism in the international durum market and several nonparametric tests confirm that the observed transfer payments set by the CWB are consistent with rent-shifting behavior in the 1972-95 pre-WTO period.
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  • Hamilton, Stephen F. & Stiegert, Kyle W., 2002. "An empirical test of the rent-shifting hypothesis: the case of state trading enterprises," Journal of International Economics, Elsevier, vol. 58(1), pages 135-157, October.
    • Handle: RePEc:eee:inecon:v:58:y:2002:i:1:p:135-157
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    4. Dong, Fengxia & Marsh, Thomas L. & Stiegert, Kyle W., 2002. "Imperfect Substitutes, Deferred Producer Payment System, And State Trading Enterprises: An Empirical Test Of Leadership In The Global Malting Barley Markets," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36625, Western Agricultural Economics Association.
    5. McCorriston, Steve & MacLaren, Donald, 2007. "Do state trading exporters distort trade?," European Economic Review, Elsevier, vol. 51(1), pages 225-246, January.
    6. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
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    8. Reimer, Jeffrey J. & Steigert, Kyle W., 2006. "Imperfect Competition and Strategic Trade Theory: What Have We Learned?," Working Papers 201528, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    9. Reimer Jeffrey J & Stiegert Kyle, 2006. "Imperfect Competition and Strategic Trade Theory: Evidence for International Food and Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-27, September.
    10. Uttam Kumar Deb, 2007. "Agricultural Trade Protection: A Perspective from India," ARTNeT Policy Briefs 11, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
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