A stochastic frontier analysis approach for estimating market power in the major U.S. meat export markets

Panagiotou, Dimitrios and Stavrakoudis, Athanassios (2018): A stochastic frontier analysis approach for estimating market power in the major U.S. meat export markets. Forthcoming in: Journal of Industry, Competition and Trade

Abstract

The present study estimates the degree of market power in the major U.S. beef and pork export destinations. The recently developed stochastic frontier (SF) estimator is used. Estimations of market and time specific Lerner indices are provided. Balanced panel data between 1980-2011 were employed. The average Lerner index is 39% for the U.S. beef exports and is the highest in the markets of ASEAN, Hong Kong/China, Japan, South Korea and Taiwan. For the U.S. pork exports, the average Lerner index is 16% and is the highest in the markets of Mexico and Taiwan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stochastic frontier; market power; U.S. meat exports
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L66 - Food ; Beverages ; Cosmetics ; Tobacco ; Wine and Spirits

References

Arnade, C., Pick, D., and Gopinath, M. (1998). Testing oligopoly power in domestic and export markets. Applied Economics, 30(6):753–760.

Baltagi, B. H. (2013). Econometric Analysis of Panel Data. Wiley, 5th edition. Coelli, T., Henningsen, A., and Henningsen (2013). frontier: Stochastic Frontier Analysis. Available at: http://CRAN.R-Project.org/package=frontier.

Felt, M.-H., Gervais, J.-P., and Larue, B. (2011). Market power and import bans: the case of Japanese pork imports. Agribusiness, 27(1):47–61.

Henneberry, S. R. and Mutondo, J. E. (2009). Agricultural trade among NAFTA countries: a case study of US meat exports. Review of agricultural economics, 31(3):424–445.

Kumbhakar, S. C., Baardsen, S., and Lien, G. (2012). A new method for estimating market power with an application to Norwegian sawmilling. Review of Industrial Organization, 40(2):109–129.

Kumbhakar, S. C. and Lovell, C. K. (2003). Stochastic frontier analysis. Cambridge University Press.

Lopez, R. A., He, X., and Azzam, A. (2018). Stochastic Frontier Estimation of Market Power in the Food Industries. Journal of agricultural economics, 69(1):3– 17.

Miljkovic, D., Brester, G. W., and Marsh, J. M. (2003). Exchange rate pass-through, price discrimination, and US meat export prices. Applied Economics, 35(6):641– 650.

Miljkovic, D., Marsh, J. M., and Brester, G. W. (2002). Japanese import demand for US beef and pork: Effects on US red meat exports and livestock prices. Journal of Agricultural and Applied Economics, 34(3):501–512.

National Bureau of Economic Research–Manufacturing Industry Database (2017). NBER-CES Manufacturing Industry Database. Available at: http://www.nber.org/nberces/. –Accessed, September 2017.

Norwood, F. B. and Lusk, J. L. (2018). Agricultural marketing and price analysis. Waveland Press.

Panagiotou, D. (2008). Trade bans, imperfect competition and welfare: BSE and the US beef industry. ETD collection for University of Nebraska - Lincoln. AAI3315057. Available at: http://digitalcommons.unl.edu/dissertations/AAI3315057.

Panagiotou, D. (2018). Collusion-enhancing effects of the own-and cross-price de- mand elasticities in merging multiproduct food industries: The case of chicken and red meat in the United States. Outlook on Agriculture, 47(3):223–232.

Panagiotou, D. (2019). Market Power Effects of the Livestock Mandatory Reporting Act in the US Meat Industry: a Stochastic Frontier Approach Under Uncertainty. Journal of Industry, Competition and Trade, 19(1):103–122.

Panagiotou, D. and Azzam, A. M. (2010). Trade bans, imperfect competition, and welfare: Bse and the US beef industry. Canadian Journal of Agricultural Economics/Revue canadienne d’agroeconomie, 58(1):109–129.

Panagiotou, D. and Stavrakoudis, A. (2017). A stochastic production frontier es- timator of the degree of oligopsony power in the US cattle industry. Journal of Industry, Competition and Trade, 17(1):121–133.

Panagiotou, D. and Stavrakoudis, A. (2018). A stochastic frontier estimator of the aggregate degree of market power exerted by the US meat packing industry. Journal of Industrial and Business Economics, 45(3):387–401.

Plain, Ron (2014). Economic Impact of U.S. Pork Trade, 1986-2014. Available at: https://agebb.missouri.edu/mkt/exportUSpaper.htm. Working paper, University of Missouri-Columbia Accessed November, Accessed November 2017.

R Core, T. (2017). R: A language and environment for statistical computing. Vienna, Austria: R Foundation for Statistical Computing; 2014.

Reed, M. and Iswariyardi, A. (2001). Competitive forces in the Japanese beef market. In Annual Meeting of the International Agricultural Trade Research Consortium (IATRC), Auckland, New Zealand.

Reed, M. R. and Saghaian, S. H. (2004). Measuring the intensity of competition in the Japanese beef market. Journal of Agricultural and Applied Economics, 36(1):113–121.

Scalco, P. R., Lopez, R. A., and He, X. (2017). Buyer and/or seller power? An application to the Brazilian milk market. Applied Economics Letters, 24(16):1173–1176.

United States Department of Agriculture – Economic Research Service (2017).Livestock and meat international trade data. Available at: https://www.ers.usda.gov/data-products/livestock-and-meat-international- trade-data/. Accessed September, 2017.

United States Department of Agriculture – Foreign Agricultural Service (2017). Global agricultural trade system. Available at: https://apps.fas.usda.gov/gats/default.aspx. accessed October, 2017.

U.S. Meat Export Federation (2017). Statistics and trade access-export statistics. Available at: https://www.usmef.org/usmef-statistics-and-trade-access/export-statistics/. Accessed September, 2017.

U.S. Meat Export Federation (2019). Statistics and trade access-export statistics. Available at: https://www.usmef.org/export-resources/u-s-suppliers/. Accessed July, 2019.