Welfare Effects of Technological Convergence in Processed Food Industries

Jun Ruan, Munisamy Gopinath and Steven Buccola

American Journal of Agricultural Economics, 2008, vol. 90, issue 2, pages 447-462

Abstract: We develop a monopolistic competition model to investigate effects of international technological convergence on factor rewards, output composition, and welfare. Comparative static analysis indicates technological convergence improves the follower's-but impairs the leader's-international competitiveness. The leader's welfare improves unambiguously; the follower's welfare depends on the relative strength of convergence's income and terms-of-trade effects. We use data from seventeen food industries in thirty countries, 1993-2001, to test these analytical predictions. Evidence of convergence is found in thirteen of seventeen industries. Convergence lifts followers' relative wages and global value-added shares. Followers benefit from convergence's positive income effect. Leaders benefit from higher terms of trade. Copyright ©2007 American Agricultural Economics Association.

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