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Heterogeneous agrifood firms, agricultural prices and access to foreign markets

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  • Léo Le Mener

Abstract

We analyze how a change in agricultural input price impacts the selection process and market shares in foreign markets for firms in the final agrifood good sector. To do so we develop a model with heterogeneous firms and intermediate good where input use is technologically constrained. We show that the effect of input price depends on labor productivity and fixed costs. Moreover, we show that a decrease in input price in all countries can decrease the probability to enter foreign markets, through export or horizontal foreign direct investment (HFDI). Finally, we show that the decrease of the intermediate good price always increases the share of HFDI relative to export, even if it can modify the HFDI-Export trade-off in favor of HFDI or export.

Suggested Citation

  • Léo Le Mener, 2015. "Heterogeneous agrifood firms, agricultural prices and access to foreign markets," Working Papers SMART 15-11, INRAE UMR SMART.
    • Handle: RePEc:rae:wpaper:201511
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    File URL: http://ageconsearch.umn.edu/bitstream/210101/2/WP15-11.pdf
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    More about this item

    Keywords

    Horizontal Foreign Direct Investment; exports; firm heterogeneity; processing sectors; agricultural prices;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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