Analyzing market power of the agricultural industry in Asia

The study of market power in the primary foods industry is of high interest to policymakers seeking to help develop low-income countries, due to its potential source to create market inefficiencies and hamper economic development. Recent studies have provided ample empirical evidence, that market power has been increasing nearly continuously since the 1980s. Nevertheless, due to the (un)availability of firm-level data, most research is constrained to analyzing firms within industries of a few high-income with a particular focus on manufacturing and service sectors. This paper proposes to remedy this gap in the literature by using aggregate data contained within the Eora Input-Output Tables and a procedure based on Generalized Maximum Entropy to provide estimates of the markup for the primary foods industry (defined as the agriculture, hunting, logging and fishing industries) for 43 countries in Asia. We document a large heterogeneity based on a country's income level classification. Furthermore, measures of globalization are seen to significantly reduce markups. Opening up to trade might therefore be an attractive option to policymakers seeking to stimulate economic efficiency.