An Economic Analysis of the ‘Buy Local’ Trend
AAEA member release new research in JAAEA
A new study released, systematically analyzes the system-wide market and welfare impacts of the trend by explicitly accounting for the empirically relevant heterogeneity in consumer preferences for local and non-local products and producer agronomic characteristics (like their efficiency in producing the different products). The explicit consideration of consumer and producer heterogeneity enables the determination of the impacts of the ‘Buy Local’ trend on the different consumers and different producers affected by this trend.
In the new article “An Economic Analysis of the ‘Buy Local’ Trend”, published in the Journal of the Agricultural & Applied Economics Association, Susweta Ray from Grainger and Konstantinos Giannakas from the University of Nebraska-Lincoln, find out how the increasingly popular “Buy Local” trend affects the prices and quantities/market shares of local and non-local products as well as the welfare of the interest groups involved.
The authors say “The market and welfare impacts of the ‘Buy Local’ trend depend on the size of the locality and whether the locality is an exporter or an importer of the products in question. For instance, while the trend benefits both consumers and producers of large exporting and importing localities, it leaves producers of small exporting localities unaffected. The presence of the trend in large localities affects also outside consumers and producers with the impact on their welfare depending on whether the large locality is an importer or an exporter of the goods in question.”
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