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Can Export Taxation Counter Monopsony Power?

Listed author(s):
  • Alan Deardorff

    (University of Michigan)

  • Indira Rajaraman

    (National Institute of Public Finance and Policy)

This paper explores the implications for trade policy of buyer concentration in markets for primary commodity exports of developing countries. Simple partial equilibrium models of monopsony and oligopsony show that the best available policy for the exporting country may be to tax exports so as to extract some of the profits of the monopsonist, even though doing so actually worsens the distortion caused by the buyer’s market power. The paper also explores the general equilibrium implications of these results for factor markets and for patterns of trade.

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Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 541.

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Length: 16 pages
Date of creation: 2005
Handle: RePEc:mie:wpaper:541
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