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Market Structure Impacts on Market Distortions from Domestic Subsidies: The U. S. Cotton Case

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  • Pan, Suwen
  • Hudson, Darren
  • Ethridge, Don E.

Abstract

This analysis uses a residual demand elasticity model to measure market power in the international cotton market. The results indicate that China exerts significant market power and affects cotton prices. Those results, combined with a partial equilibrium model of the international cotton market, are used to evaluate the welfare consequences of U.S. cotton subsidy policies for major cotton exporters under alternative assumptions about global market structure. The results indicate that the effects of U.S. subsidies on the world cotton price are much smaller under an imperfectly competitive international market than under a perfectly competitive market scenario; the former appears to be a realistic case.

Suggested Citation

  • Pan, Suwen & Hudson, Darren & Ethridge, Don E., 2010. "Market Structure Impacts on Market Distortions from Domestic Subsidies: The U. S. Cotton Case," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 11(2), pages 1-19, December.
    • Handle: RePEc:ags:ecjilt:98240
    DOI: 10.22004/ag.econ.98240
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    1. Carter, Colin A. & MacLaren, Donald & Yilmaz, Alper, 1999. "How Competitive Is The World Wheat Market?," Working Papers 11973, University of California, Davis, Department of Agricultural and Resource Economics.
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    3. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
    4. Mr. Stephen Tokarick, 2003. "Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium," IMF Working Papers 2003/110, International Monetary Fund.
    5. Stephen Enke, 1944. "The Monopsony Case for Tariffs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(2), pages 229-245.
    6. MacDonald, Stephen, 2000. "The New Agricultural Trade Negotiations: Background and Issues for the U.S. Cotton Sec," MPRA Paper 70941, University Library of Munich, Germany.
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    Cited by:

    1. Xinyao Wang & Dan Li & Yue Yu, 2022. "Current Situation and Optimization Countermeasures of Cotton Subsidy in China Based on WTO Rules," Agriculture, MDPI, vol. 12(8), pages 1-16, August.
    2. Muhammad, Andrew & McPhail, Lihong Lu & Kiawu, James, 2012. "Do U.S. Cotton Subsidies Affect Competing Exporters? An Analysis of Import Demand in China," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(2), pages 1-15, May.

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