Food Protection for Sale*

Authors

  • Rigoberto A. Lopez,

    Corresponding author
    1. Depts. of Agricultural and Resource Economics and Economics, respectively, University of Connecticut, Storrs, USA
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  • Xenia Matschke

    Corresponding author
    1. Depts. of Agricultural and Resource Economics and Economics, respectively, University of Connecticut, Storrs, USA
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  • *

    We thank the Food Policy Marketing Center for funding via CSREES Special Grant No. 2004-34178-13469.

Lopez, Matschke: Depts. of Agricultural and Resource Economics and Economics, respectively, University of Connecticut, Storrs, CT 06269, USA. Tel: (860) 486-1921; E-mails: Rigoberto.Lopez@uconn.edu and Xenia.Matschke@uconn.edu.

Abstract

This article tests the Protection for Sale (PFS) model using detailed data from US food-processing industries under alternative import-demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. However, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that this empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low import elasticities (or slopes) resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found.

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