Essays on Commodity Market Liberalization, Spatial Competition and Farmer's Price.

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2006-08-04

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This dissertation examines the effects of commodity market liberalization on the farmer's price. Chapter two of this dissertation presents a theoretical model of commodity market liberalization which aims to analyze the impact of market liberalization on the farmer's price. This monopsony-type model includes three main features often studied separately in the literature: spatial competition among buyers, transaction costs, and the international environment. The model replicates the mixed results observed following commodity market liberalization. It also stresses the fact that the outcome of commodity market liberalization is ambiguous, unless the three features listed above can be controlled.

The empirical model developed in chapter three is one of the few models that take advantage of the recent developments in the field of spatial econometrics, the availability of household survey data, and geographical information data in order to analyze the market reforms in developing countries. The empirical model tests for price competition and transaction costs using the Generalized Spatial Two-Stage Least Squares (GS2SLS) procedure, developed by Kelejian and Prucha (1998). The data is a two-period panel household survey data of rice farmer in Vietnam. The results show the presence of price competition among buyers during the two markets regimes. In addition, the level of competition decreases after the market liberalization. Regarding transaction costs, proportional transaction costs decrease after the market liberalization while fixed transaction costs do not affect farmer's price during both market regimes.

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