Title

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

Authors

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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