The purpose of this paper is to examine the effects of the changes in meat imports on marketing margins and producer's income share in Korean livestock industry. Theoretical analyses are based on Gardner's (1975) framework under the assumption of line...
The purpose of this paper is to examine the effects of the changes in meat imports on marketing margins and producer's income share in Korean livestock industry. Theoretical analyses are based on Gardner's (1975) framework under the assumption of linear homogeneity of the production function and perfect competition both in output and input markets. His theoretical framework of the closed economy is extended by including foreign imports. Also, empirical study is conducted for beef and pork industries.
The results show that the increase in import quota by 10 percent causes the domestic beef price to decline by 3.2 percent and the marking margins in this industry to increase by 16 percent with the elastic marketing services. In this case, the cattle producer's income shares reduce by 5.4 percent. For pork industry, domestic pork price declines by 0.9 percent as a result of 10 percent increase in imports. Also, the marketing margin for pork maeket increases by 3.9 percent, and hog producer's income share decreases by 1.3percent. The larger the supply elasticity of marketing services, the greater the marketing margin and the wider the extent that producer income share reduces.
The results of this study indicates that marketing margins and producer's income shares are sensitive to the changes in the external economic environments in domestic meat markets such as imports. Some policy recommendations implied by this study can, therefore, be provided as follows. First, it is necessary for cattle producers to be supported by keeping calf production stable. Second, it is essential to make markets operate efficiently in order for the supply elsticities of marketing services to be less sensitive to the changes in imports.