Title

An Empirical Test Of The Rent-Shifting Hypothesis: The Case Of State Trading Enterprises

Keywords

New empirical industrial organization; Profit shifting; Vertical separation

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 pre-commitment 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. © 2002 Elsevier Science B.V. All rights reserved.

Publication Date

7-30-2002

Publication Title

Journal of International Economics

Volume

58

Issue

1

Number of Pages

135-157

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/S0022-1996(01)00159-3

Socpus ID

0036064342 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/0036064342

This document is currently not available here.

Share

COinS