Effects of Trade Policy on Technological Innovation in Agricultural Markets-Implications for the Developing Economies

Discussion Papers

No.687

by Lei Lei

January 2018

ABSTRACT

An induced technological innovation, which may be biased as a result of policy orientation, can have a complex impact on the traded commodity, particularly in a market with highly differentiated products. Furthermore, especially for developing countries, most of which are based on agriculture, it is important to understanding that impact. This paper aims to study a recent policy change at the European Union, by using an Ex-Ante method and a displacement model. The policy change affected global apple exports, particularly for large exporters such as China, South Africa, Chile, and the United States. Considering data availability, the project focuses on the U.S. market to study the impact of the EU’s policy-induced, biased, and technological innovation in the U.S. agricultural industry. The results and policies implications are generally applicable to other major agricultural exporters, including those from developing countries.

Keywords: technological innovation, differentiated products, input and output markets
JEL classification: Q12, Q16, Q17

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