An Empirical Test of the Rent-Shifting Hypothesis: The Case of State Trading Enterprises

Stephen Hamilton and Kyle Stiegert ()

No 201567, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: A central result in the theoretical literature on strategic trade is the ërent-shifting hypothesisí, the idea that governmentís can employ trade policy as a precommitment device to transfer profit from foreign to domestic firms. To our knowledge, however, the rent-shifting hypothesis remains untested empirically. This paper constructs a theory-based empirical test of rent-shifting behavior that relies on observations of government precommitment variables employed through State Trading Enterprises (STEs). The analysis applies data on the delayed producer payment structure of the Canadian Wheat Board (CWB) and examines its merits as a rent-shifting mechanism in the international durum market. The model fails to reject the hypothesis that the CWB utilizes a pre-commitment mechanism in the international durum market and several nonparametric tests confirm that the observed transfer payments set by the CWB are consistent with rent-shifting behavior in the 1972-95 pre-WTO period.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 27
Date: 2001
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Journal Article: An empirical test of the rent-shifting hypothesis: the case of state trading enterprises (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201567

DOI: 10.22004/ag.econ.201567

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