The economics of geographical indications (GIs) is assessed within a vertical product differentiation framework that is consistent with the competitive structure of agriculture. It is assumed that certification costs are needed for GIs to serve as (collective) credible quality certification devices, and production of high‐quality product is endogenously determined. We find that GIs can support a competitive provision of quality and lead to clear welfare gains, although they fall short of delivering the (constrained) first best. The main beneficiaries are consumers. Producers may also accrue some benefit if production of the high‐quality products draws on scarce factors that they own.

The Armington trade model distinguishes commodities by country of origin, and import demand is determined in a separable two-step procedure. This framework has been applied to numerous international agricultural markets with the objective of modeling import demand. In addition, computable general equilibrium (CGE) models commonly employ the Armington formulation in the trade linkage equations.The purpose of this paper is to test the Armington assumptions of homotheticity and separability with data from the international cotton and wheat markets. Both parametric and nonparametric tests were performed, and the empirical results reject the Armington assumptions. This has important implications for international trade modeling and CGE modeling.

The competitive structure of U.S. agricultural exports is examined using a model of exporter behavior based on pricing decisions across destination markets. Market power is revealed in the adjustment patterns of export prices in response to exchange rate movements. The results reject the hypothesis that the export pricing decisions by U.S. firms are consistent with price discrimination across destination markets for cotton, corn, and soybeans. The strongest evidence against the competitive market structure is obtained for international trade in wheat, where results indicate that the two largest importers (Soviet Union and PRC) may exert market power to obtain lower prices.

This article investigates the determinants of foreign direct investment and its relationship to trade in the U.S. food industry. A multinational corporation maximizes profits by choosing between production at home, which is exported, and production in a host country. This introduces the possibility that foreign affiliate sales can substitute and/or complement exports. The empirical framework consists of a four-equations system with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm small substitution between foreign sales and exports, and that the host country's protection policies affect the decision to invest abroad. Copyright 1999, Oxford University Press.

We present a model with two exporters who ship a differentiated commodity to the same import destination. All pricing occurs in a common currency, that of the home exporter. We show that the foreign-exporter to home-exporter exchange rate can influence the home exporter's pricing decision. It has been previously argued that only the importer to home-exporter exchange rate matters to the home exporter.