Government Intervention in Imperfectly Competitive Agricultural Input Markets

The frequent demands for protection by the fertilizer industry in many developed countries may have important implications for the agricultural sector. This paper provides a theoretical justification for government intervention in the fertilizer market in the form of an import tariff against foreign competitors. However, a superior policy would be for the government to counter the competitive distortion that exists in the market. An even better outcome is attained by using both policies simultaneously. Moreover, since the fertilizer industry undergoes continuous structural change, the extent to which optimal policies should vary is also investigated.