Discussion Papers

No.687 Effects of Trade Policy on Technological Innovation in Agricultural Markets-Implications for the Developing Economies

by Lei Lei

January 2018


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

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.