Is 'Getting The Prices Right' Always Right? How Trade Liberalization Can Fail
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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- Stanley Fischer & Carlos A. VÃ©gh Gramont & Ratna Sahay, 1996.
"Stabilization and Growth in Transition Economies; The Early Experience,"
IMF Working Papers
96/31, International Monetary Fund.
- Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 1996. "Stabilization and Growth in Transition Economies: The Early Experience," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 45-66, Spring.
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- repec:bil:bilpap:963 is not listed on IDEAS
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