Research

Did the Fertilizer Cartel Cause the Food Crisis? by Hinnerk Gnutzmann and Piotr Spiewanowski
Food commodity prices escalated during the 2007/2008 food crisis, and have scarcely fallen since. We show that high fertilizer prices, driven by the formation of an international export cartel as well as high energy prices, explains the majority of the recent price spikes. In particular, we estimate the pure fertilizer cartel effect explains more than 60% of crisis food price increases. While population growth, biofuels, high energy prices and financial speculation doubtlessly put stress on food markets, our results help to understand the severity and sudden emergence of the crisis and suggest avenues to prevent its repetition. Working Paper | Policy Brief
The Silent Success of Customs Unions by Hinnerk Gnutzmann and Arevik Gnutzmann-Mkrtchyan
While “mega FTAs” and WTO–driven efforts at multilateral liberalisation dominate the agenda, customs unions (CU) are the silent success story of regional
integration. Throughout the world, CUs have been superseding earlier FTAs, as new unions were formed or old ones expanded. Due to problems of measurement,
this fact appears to have gone largely unnoticed so far. We show that the proliferation of CUs is driven by national social welfare considerations: even allowing for
lobbying, CUs lead to higher social welfare than any other bilateral trade agreement. Thus, even the most ambitious mega FTAs eventually turn into “mega
CUs”.
Price Discrimination in Asymmetric Industries: Implications for Competition and Welfare by Hinnerk Gnutzmann
Price discrimination by consumer’s purchase history is widely used in regulated industries, such as communication or utilities, both by incumbents and entrants. I show that such discrimination can have surprisingly negative welfare effects — even though prices and industry profits fall, so does consumer surplus. Earlier studies that did not allow entrants to discriminate or assumed symmetric firms yielded sharply different results, the pro-competitive effect of price discrimination are stronger in these settings. Imposing a pricing constraint on incumbent’s discrimination leads the entrant to discriminate more heavily, but still improves both consumer and producer welfare.