An empirical test of the rent-shifting hypothesis: the case of state trading enterprises

    Authors

    S. F. Hamilton;K. W. Stiegert

    Comments

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    Abbreviated Journal Title

    J. Int. Econ.

    Keywords

    profit shifting; vertical separation; new empirical industrial; organization; VERTICALLY RELATED MARKETS; INTERNATIONAL-TRADE; COUNTERVAILING DUTIES; EXPORT SUBSIDIES; POLICY; COMPETITION; OLIGOPOLY; TARIFFS; COST; Economics

    Abstract

    A central result in the theoretical literature on strategic trade is the 'rent-shifting hypothesis'. the idea that government's can employ trade policy as a precommitment device to transfer profit from foreign to domestic firms. To our knowledge, however, the rent-shifting hypothesis remains untested empirically. This paper constructs a theory-based empirical test of rent-shifting behavior that relies on observations of government precommitment variables employed through State Trading Enterprises (STEs), The analysis applies data on the delayed producer payment structure of the Canadian Wheat Board (CWB) and examines its merits as a rent-shifting mechanism in the international durum market. The model fails to reject the hypothesis that the CWB utilizes a pre-commitment mechanism in the international durum market and several nonparametric tests confirm that the observed transfer payments set by the CWB are consistent with rent-shifting behavior in the 1972-95 pre-WTO period. (C) 2002 Elsevier Science B.V. All rights reserved.

    Journal Title

    Journal of International Economics

    Volume

    58

    Issue/Number

    1

    Publication Date

    1-1-2002

    Document Type

    Article

    Language

    English

    First Page

    135

    Last Page

    157

    WOS Identifier

    WOS:000176478400006

    ISSN

    0022-1996

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