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Abstract
The average value of a particular class of agricultural exports varies widely across different
destinations. This raises the question: in the event of a supply shock, such as the implementation
of the Emissions Trading Scheme, can farmers offset higher costs by raising their average prices
by contracting exports to lower value destinations? If the difference in value reflects different
prices because producers have market power, the answer will be “yes”. If the difference in value
reflects differences in the quality of goods exported to different destinations, the answer is “no.”
This paper use a variety of trade data and techniques to examine which explanation is most likely
to be relevant. While the answers are not definitive, there is little support for the hypothesis that
exports are curtailed to lower value destinations when supply costs increase.