Communication Dans Un Congrès Année : 2022

Geographical Indications and International Trade - A Theoretical Perspective

Résumé

This paper provides a first general equilibrium model of international trade to include Geographical Indications (GI). We extend the theoretical framework by Melitz (2003) to construct a market with two sectors (GI and non-GI). Each firm, independently of its sector, acts as a profit maximising individual and produces a horizontally differentiated variety of a certain type of product (e.g. dried ham) for which it has a private trademark. To define the GI sector, we adapt a set of parameters to most closely reproduce the typical characteristics of production, management, and marketing observable in a group of producers making use of the same GI label. These characteristics are (i) enhanced market access (both to domestic and foreign markets) through the reputation associated with the GI label and the resulting lower cost of building a private trademark, (ii) (subsidised) collective management of the GI label, which allows GI firms to share part of the fixed cost of production (e.g. marketing of the GI label and monitoring the market for possible imitators), (iii) the GI collective having no control over supply and exporting decisions of individual GI firms, and (iv) lower productivity of GI producers through the use of traditional and/ or artisanal production methods and local resources. GI protection refers both to the structure of the GI sector as defined in (i)-(iv) as well the exclusivity of access to this structure for firms from a given GI region. GI protection leads to increased entry of GI firms, resulting in a broader range of GI varieties available to consumers. This effect is a consequence from GI firms sharing a subset of their operating fixed costs, as the reduction in resources needed in production translates into more GI firms finding it profitable to produce. This effect of GI protection inherits a positive externality, as each additional GI firm reduces the cost of production for all GI firms operating in the market. As an individual firm does not consider this mechanism in its entry decision, entry of GI firms is lower than socially optimal. Paying a subsidy to the GI collective to foster entry thus provides a way for policy makers to increase consumer welfare. Lower productivity of the GI sector implies that, on average, GI firms will charge higher prices for their varieties than non-GI firms. Upon opening the economy, the least productive firms of both sectors will be forced out of the market by more productive competitors from foreign countries. Resilience to competition implied by the reduction in resources needed for production will alleviate this effect for the GI sector. An important novelty of the model is to define the ambiguous effect of GI protection on the exporting behaviour of GI firms: Through the reduction of fixed operating costs, domestic production becomes relatively more attractive than exporting, leading to reduced exports in the GI sector. On the contrary, lower entry costs to foreign markets make it cheaper for GI firms to export, leading to enhanced export activity in the GI sector.

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Dates et versions

hal-03791199 , version 1 (29-09-2022)

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Identifiants

  • HAL Id : hal-03791199 , version 1

Citer

Jakob Rackl, Luisa Menapace. Geographical Indications and International Trade - A Theoretical Perspective. Worldwide Perspectives on Geographical Indications, Centre de Coopération Internationale en Recherche Agronomique pour le Développement [Cirad], Jul 2022, Montpellier, France. ⟨hal-03791199⟩

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