IS "GETTING THE PRICES RIGHT" ALWAYS RIGHT? HOW TRADE LIBERALIZATION CAN FAIL

Beatriz Gaitan () and Ferdinand Pavel

No 12970, Bulletins from University of Minnesota, Economic Development Center

Abstract: We present a general equilibrium model with oligopsonistic market structure in one of the sectors. Buyers of inputs can set the price of inputs by being involved in rent seeking activities. The framework developed is applied to the Bulgarian economy in particular to the agro-food chain. From the application to the Bulgarian economy we find that if there are market imperfections, such as oligopsonistic behavior in the economy, there are no significant welfare gains from free trade. Significant welfare gains from trade are observed only when a competitive structure prevails. We show that eliminating this market imperfection can bring important welfare implications and an efficient reallocation of resources.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 25
Date: 2000
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Working Paper: IS 'GETTING THE PRICES RIGHT' ALWAYS RIGHT? HOW TRADE LIBERALIZATION CAN FAIL (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umedbu:12970

DOI: 10.22004/ag.econ.12970

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