Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 189-199 |
| Journal | Energy Economics |
| Volume | 55 |
| DOIs | |
| Publication status | Published - 2016 |
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Keywords
- price transmission
- food supply chain
- biofuels
- policies
- mandate
- tax credit
- prices
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The effect of ethanol policies on the vertical price transmission in corn and food markets. / Drabik, D.; Ciaian, P.; Pokrivcak, J.
In: Energy Economics, Vol. 55, 2016, p. 189-199.Research output: Contribution to journal › Article › Academic › peer-review
TY - JOUR
T1 - The effect of ethanol policies on the vertical price transmission in corn and food markets
AU - Drabik, D.
AU - Ciaian, P.
AU - Pokrivcak, J.
PY - 2016
Y1 - 2016
N2 - This paper analyzes the impact of ethanol policies on price transmission along the food supply chain. We consider the US corn sector and its vertical links with food and ethanol (energy) markets. We find that ethanol is a source of imperfect price transmission in the food supply chain. Ethanol, however, alters price transmission only under a binding blender's tax credit and only from food to corn (not vice versa). Our results indicate that ethanol weakens the response of corn and food prices in terms of their level changes to shocks occurring in agricultural (corn and food) markets. The results are robust to different assumptions on the model parameters. Although market power has previously been identified as a source of imperfect price transmission in the food supply chain, our findings show that in the presence of ethanol, the imperfect price transmission may occur even if markets are perfectly competitive. This warrants careful evaluation of markets before any policy intervention.
AB - This paper analyzes the impact of ethanol policies on price transmission along the food supply chain. We consider the US corn sector and its vertical links with food and ethanol (energy) markets. We find that ethanol is a source of imperfect price transmission in the food supply chain. Ethanol, however, alters price transmission only under a binding blender's tax credit and only from food to corn (not vice versa). Our results indicate that ethanol weakens the response of corn and food prices in terms of their level changes to shocks occurring in agricultural (corn and food) markets. The results are robust to different assumptions on the model parameters. Although market power has previously been identified as a source of imperfect price transmission in the food supply chain, our findings show that in the presence of ethanol, the imperfect price transmission may occur even if markets are perfectly competitive. This warrants careful evaluation of markets before any policy intervention.
KW - price transmission
KW - food supply chain
KW - biofuels
KW - policies
KW - mandate
KW - tax credit
KW - prices
U2 - 10.1016/j.eneco.2016.02.010
DO - 10.1016/j.eneco.2016.02.010
M3 - Article
VL - 55
SP - 189
EP - 199
JO - Energy Economics
JF - Energy Economics
SN - 0140-9883
ER -