General Equilibrium Impacts in Imperfect Agricultural Markets: Evidence from the Tanzanian Cotton Industry

• Development Workshop

Date and Location

Tuesday, December 4, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Economic evaluations of the impacts of technological improvements in agriculture focus only on the target group of farmers who adopt new technologies. This paper examines general equilibrium impacts in imperfectly competitive markets by evaluating the spillover effects of a technological change in agricultural production in the presence of intermediary market power. Using industry and original survey data from the Western Cotton Growing Area of Tanzania, I construct an index of oligopsony power and show that technological improvement in cotton production has significant spillover benefits for households not directly involved in cotton production. Intermediary market power of downstream cotton ginners not only mitigates the direct benefits for poor cotton-producing households but also significantly diminishes the indirect benefits for non-cotton-producing households. The results in this paper have important policy implications while extending the literature on agricultural research by integrating general equilibrium theory with market structure models.

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