The role of vertical market structure on subsidy incidence: The case of agricultural markets

Gunnar Heins and Ignacia Mercadal

Economics Letters, 2025, vol. 254, issue C

Abstract: We empirically investigate the pass-through of agricultural subsidies to patented seed expenses. Theory predicts that when input suppliers have market power and the downstream market is competitive, they will at least partially capture the subsidy. Using a novel instrument for subsidies, we test this prediction using 2017 U.S. Census of Agriculture data and find that a 1% increase in subsidies leads to a 0.5% increase in seed expenses.

Keywords: Agricultural subsidies; Passthrough; Vertical structure; Market power (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002472

DOI: 10.1016/j.econlet.2025.112410

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