Informal input suppliers, quality choice and welfare

This paper proposes a theoretical model in which a formal upstream firm competes against informal input suppliers, which constitute an alternative, albeit lower-quality input source for formal downstream firms. The existence of an alternative source increases competition in the industry, which tends to be welfare-increasing. However, it may also distort the incentives of the formal upstream firm to invest in quality upgrading. Assuming quantity competition downstream, we analyze how these incentives change and whether the negative welfare effect of a reduced investment by the upstream firm may more than offset the positive welfare effect of increased competition brought about by informal input suppliers. We find that there are parameter values such that this is the case, and welfare decreases if informal input suppliers are present. We analyze the robustness of this result to alternative modeling assumptions, such as price competition downstream and the use of two-part tariffs by the formal upstream firm.

Can Internet Use Improve Farmers' Welfare Effect——A Case Study of Chinese Vegetable Growers

This article uses the data of 797 vegetable growers in Shouguang, Shandong Province, and the endogenous conversion model to investigate the impact of Internet use on household welfare. We select the per-mu vegetable yield, net income, and per capita net income of households as welfare indicators. The results show: ① Internet use can significantly improve the farmers' welfare effect. ②Under counterfactual assumptions, when farmers who use the Internet do not use it, the farmers' vegetable yield per mu, net income and household per capita net income will drop by 10.88%, 13.96% and 9.46%. When farmers who do not use the Internet use it, the farmers' vegetable output, net income and family per capita net income will rise by 13.62%, 16.66% and 11.64%. Internet use has the most excellent effect on the net income of vegetables, followed by the yield per mu, and the net income per household is the lowest. ③ Compared with small-scale farmers, Internet use has a better impact on the welfare of large-scale farmers, which also widens the welfare gap between farmers to a certain extent. Based on this, make suggestions to strengthen information infrastructure, improve information technology training, and adjust support policies promptly.

Welfare Effect of Adaptation Policy for Rice Price Variation under Climate Change in Bangladesh

This study was designed to evaluate the welfare effect of the climate adaptation policy for rice price variation in terms of producer surplus, consumer surplus, and net change in social welfare in Bangladesh, using the partial equilibrium model of the adaptation policy. The long-term trend of climate and policy adaptation for climate impact on price variation of the rice in Bangladesh is taken into economic model approach. The base period of this research is 1977-2009 and the extrapolation period is 2010-2030. To execute the designed analysis, the time series data from national and international organization are used. The results for the support price policy show that the total surplus that producers receive is equivalent to USD 1,164 million, substantially higher than the consumer surplus (USD 763 million) during the period 2010–2030. The net change in the social welfare owing to the support price policy is equivalent to –1483 million (USD) during the period 2010–2030. Moreover, analysis of the subsidized price policy shows that the total surplus that consumers receive (USD 1,958 million) is relatively higher than the producer surplus (USD 1,738 million) in the same period. The net change in social welfare owing to the subsidized price policy (–197 million USD) is much higher than that owing to price support –1483 million (USD). Implementing the dual price policy would result in a much higher net change in the society’s welfare (–1185 million USD) compared to that possible through each policy separately. In conclusion, these adaptation and price stabilization policies are recognized to be more useful in mitigating the severe price rise and fall in the future food market, in favour of both producers and consumers. Even though the change in net social welfare is higher, the higher cost of policy budget is imperative to make stable food supply and security.

The Economics and Politics of Preferential Trade Agreements

The proliferation of preferential trade agreements (PTAs) is a key feature of this current wave of globalization. This chapter surveys the literature related to determinants of PTAs and their consequences. The key findings of the literature are two-fold. First, the expansion of global value chains is the main driver of the formation of PTAs. Second, PTAs generate stark distributional consequences among firms with large productive firms reaping the lion’s share of the gains from trade. Given that the welfare effect of preferential liberalization is generally small, forming PTAs is likely to remain a controversial trade policy among politicians and voters.