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Returns to Public Investments in Agriculture with Imperfect Downstream Competition

Stephen F. Hamilton and David L. Sunding
American Journal of Agricultural Economics
Vol. 80, No. 4 (Nov., 1998), pp. 830-838
Stable URL: http://www.jstor.org/stable/1244067
Page Count: 9
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Returns to Public Investments in Agriculture with Imperfect Downstream Competition
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Abstract

A multiple-market framework is developed to measure the size and distribution of research benefits. The model considers an upstream raw product market and a downstream finished product market and allows for imperfect competition in the intermediary food-processing sector. A central conceptual result is derived: an increase in raw product output is a sufficient condition for cost-reducing innovations in the farm sector to increase social welfare. A special case of linear farm supply and isoelastic processing production functions reveals that necessary conditions for welfare to decrease are a convergent farm supply shift, an oligopsonistic upstream market configuration, and increasing returns-to-scale processing technology.

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