Welfare Effects of Trade Associations: The Case of the Chilean Salmon Export Industry

Abstract

This paper examines the welfare consequences of a trade association in an exporting country on consumers in destination countries. We estimate a structural model of the Chilean Salmon exporting industry that endogenizes firms’ pricing and export decisions. Our results show that the trade association has a strong positive effect on consumer utility and requires higher marginal costs of production, which is consistent with mechanisms of higher quality products and lower trade frictions. We also document robust evidence of collusive activity among trade association members. Our counterfactual analysis reveals that eliminating the trade association would still significantly decrease consumer welfare in destination countries.

Keywords: Trade Association, Chilean Fish Industry, Collusion, Consumer Welfare, Endogenous entry

JEL Classification: D22, L13, L44, L66, Q22