International Market Structure and the Impacts of Market Distortions from Domestic Subsides: The U.S Cotton Case
Mutuc, Maria M.
Ethridge, Don E.
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This analysis uses a residual demand elasticity model to measure market power of the international cotton market. The results indicate that China dominates the cotton price with a significant market power in China compared to all the cotton exporters. Those test results combined with a partial equilibrium model of the international cotton market are used to study the welfare consequences of U.S. cotton subsidy policies for major cotton exporters under alternative assumptions about global market structure. The results indicate that the effects of U.S. subsidies on world cotton price are much smaller under imperfectly competitive international markets than those under completely competitive market scenarios.