Norwegian export of farmed salmon − trade costs and market concentration

ABSTRACT

While variation in unit value most commonly has been associated with quality in the trade literature, observed differences in prices between markets might also be explained by variation in market concentration and the degree of competition. Using transaction data on Norwegian exports of salmon, we introduce a Herfindahl index as a measure of competition in a standard gravity model. We find that competition typically is weaker in small and distant markets that due to high trade costs are served by relatively few firms. We argue that the anti-competitive impact of trade costs may explain price differentiation between markets even for homogeneous products.

KEYWORDS:

• Gravity
• trade costs
• market concentration
• salmon

JEL CLASSIFICATION:

• F10
• F14
• Q22

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Production shares for Atlantic salmon in 2016 (FAO 2018): Norway (54,8%), Chile (25,6%), UK (7,6%), Canada (6,7%), and others (7,7%). Virtually, all Canadian production and most Chilean production go to the U.S. Among ‘others’, the largest is the Faroe Islands, who mostly export to the UK, Australia who mainly produces for domestic consumption and has low imports, and the U.S. that mainly produces for domestic consumption.

Additional information

Funding

Financial support from the Research Council of Norway [CT # 233836] is acknowledged.