the effects of taxation price control and government contracts in oligopoly and monopolistic competition abstract many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion or quantity of output to the government at a fixed price p r with the remainder being sold on the open market often this is combined with consumer rationing examples include cement and sugar in india and health housing and defence in many countries the paper investigates the effects of these schemes including sales and excise taxation on prices output and household welfare under oligopoly and monopolistic competition less government control reduced may raise prices and tax shifting can be above or below 100 percent

testing the efficient redistribution hypothesis an application to japanese beef policy we discuss and model the structure of the political economy of japanese beef markets and we apply bullock s statistical test of the efficient redistribution hypothesis to our model to study the pareto efficiency of japanese beef policy in 1990 and 1991 we found that under the hypothesis that our modeled political economy adequately reflects the true japanese beef political economy we could not reject at the 5 significance level that japanese beef policy was inefficient in 1990 and in 1991 however we could reject inefficiency in 1991 at a 7 level of significance

farmers and the u s congress rethinking basic institutional assumptions about agricultural policy abstract an assumption shared by most agricultural economists is that as farm numbers decline in a democratic government farm policy attention from rule makers will decline as well this assumption despite important work to the contrary in institutional economics is often voiced in federated governing units especially the u s where constituents are locally organized and the commitment of rule makers to nationwide policy is limited while significant theoretical literature challenges that majoritarian view from the perspective of interest group theory this is the first empirical test and explanation of the behavior of rule makers the findings of this analysis indicate that classic majoritarian expectations are not met in the u s congress instead unexpectedly large numbers of legislators seek favorable policy action for farmers as distinct minorities within their districts however these same legislators balance their attention to farmers by also taking policy action in agriculture on behalf of other types of contituents legislators explain these actions as the result of their own electoral needs to satisfy vocal minorities from their political districts plus the ease with which they can marginally adjust a large base of u s farm programs thus a kind of neo majoritarianism emerges these results are especially important given the growing attention to federated governance in the european union east europe in north america through free trade agreements and with the gatt they indicate that farmers will continue despite shrinking numbers to be influential in those governing structures that have historically strong farm programs and the capacity to diversify from that policy base

promotion of the agricultural sector and political power in austria in most industrialized countries farmers as a small and well orgnized group are ableto influence government decisions to get rent creating proposals enacted two different viewsare presented to explain why the chicagoan view efficient redistribution hypothesis and the virginian view inefficient outcome of political bargaining a vertically structuredempirical model of the austrian farm sector is employed to test both hypotheses quantitativeresults of the welfare transfers from consumers taxpayers to farmers and agribusiness firmsare derived and the political weights of these groups are presented

competition in political and economic markets do anomalies play an important role in explaining economic and political choices are political decisions more prone to anomalies irrationality and inefficiency than economic decisions in their integration of results derived from experimental psychology and applied political economy frey and eichenberger 1990 argue that social scientists ought to answer these questions in the affirmative after examining a large body of choice data frey and eichenberger conclude that individuals deviate from the axioms of rational choice in their view the resultant anomalies in individual behavior are unaffected by the aggregation which occurs in the economic marketplace they conclude that political decision making systems correct no larger a proportion of these anomalies than are corrected by the economic market in many institutional settings outlined in their paper decision making systems can be expected to magnify individuals deviations from rational behavior system wide irrational behavior will then produce less frequent trading and a less efficient allocation of resources in this note we examine two components of frey and eichenberger s argument first we reconsider their evidence for irrational behavior in light of a larger body of experimental data which includes choices made in market settings second we argue that competition in political markets will tend to eliminate aggregate anomalies just as it does in economic markets experimental economists often generate data which distinguish between choices individuals indicate in unstructured environments and transactions individuals consummate in markets initial statements regarding choices are often inconsistent with subsequent trading behavior these data indicate that the economist s maximization paradigm based on tenets of rational choice is

rents from in kind subsidy charity in the public sector public choice analysis usually focuses attention on the behaviour of self interested individuals but this paper considers rent seeking when some taxpayers are motivated by altruism redistribution policies initiated by self interested rent seekers require taxpayer approval even if taxpayers are fully informed their resistance to inefficient schemes is reduced when public sector schemes are the only means available to pursue altruistic goals altruism serves to broaden the scope within which rent seekers may operate a discussion of international tied aid illustrates the impact which rent seeking can exert on public sector charity

redistributing income back to european community consumers and taxpayers through the common agricultural policy a multiple policy instrument generalization of gardner s surplus transformation curve analysis is applied to an empirical model of the ec wheat sector to compare welfare effects of policy change proposals a production quota support price combination is estimated as the most efficient means of making relatively small transfers from ec agriculture to consumers taxpayers a coresponsibility levy support price combination is estimated as the most efficient means of making larger transfers the importance of accounting for income transfer size distortions in related markets and the structure of markets when comparing welfare effects of policy change proposals is demonstrated

predatory versus productive government the case of u s agricultural policies this essay will argue that agricultural policy in the united states has led to both the enhancement of efficiency through productive policies and the transfer of wealth and income to special interests through redistributive or predatory policies these two activities can be labeled as pests and perts pest policies or political economic seeking transfers are meant to redistribute wealth from one social group to another and are not explicitly concerned with efficiency in contrast perts or political economic resource transactions are intended to correct market failures or to provide public goods these policies have neutral distributional effects at least in design a review of the history of public policy in agriculture reveals not only tension between the pert and pest roles of the public sector but also some coordination between these two types of activities as different interest groups pressure the political process the government trades off pests and perts in its attempts to acquire balance and secure political power at times this has led to combinations of programs that appear incoherent in such a world the challenge for economists is to design and advocate policies that are both economically productive and politically sustainable

political economy of public policies insights from distortions to agricultural and food markets the agricultural and food sector is an ideal case for investigating the political economy of public policies many of the policy developments in this sector since the 1950s have been sudden and transformational while others have been gradual but persistent this paper reviews and synthesizes the literature on trends and fluctuations in market distortions and the political economy explanations that have been advanced based on a rich global data set covering a half century of evidence on commodities countries and policy instruments the paper identifies hypotheses that have been explored in the literature on the extent of market distortions and the conditions under which reform may be feasible

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

vertical contracts in the video rental industry a large body of theoretical work has explored the channels through which vertical contracts can induce efficiency improvements however it is also important to study vertical contracts empirically in order to gain insight into the relative size of different types of efficiency gains in this paper i empirically analyse a contractual innovation in the vertically separated video rental industry prior to 1998 video stores obtained inventory from movie distributors using simple linear pricing contracts in 1998 revenuesharing contracts were widely adopted i investigate the effect of the introduction of revenue sharing contracts on firms profits and consumer welfare i analyse a new panel data set of home video retailers that includes information on individual retailers contract and inventory choices as well as rentals and contract terms for 246 movie titles and 6137 retailers in the u s during each week of 1998 and 1999 and the first half of 2000 a structural econometric model of firms behaviour is developed that describes the nature of firms contract choices estimates from this model indicate that both upstream and downstream profits increase by 10 under the revenue sharing contract for popular titles for less popular titles the effects can be even larger i also estimate that consumers benefit when revenue sharing contracts are adopted

deregulation redux does mandating access to bottleneck facilities necessarily improve welfare we demonstrate that deregulation in the form of vertical separation of network components into natural monopoly and potentially competitive markets does not truly represent a lessening of regulatory burdens that is vertical separation is not synonymous with deregulation more competitors is not equivalent to more competition we assume a public interest regulator that is constrained to set a unit price that maximizes expected welfare subject to a break even constraint we show that under both symmetric and asymmetric information cases the information demands on the regulator of the vertically integrated system are no greater than those in the case of vertical separation

economic development institutional change and the political economy of agricultural protection an econometric study of belgium since the 19th century this empirical study uses 100 years of annual data on 11 agricultural commodities from belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection the analysis shows that changes in agricultural protection are caused by a combination of factors governments have increased protection and support to farmers when world market prices for their commodities fell and vice versa offsetting market effects on producer incomes other economic determinants were the share of the commodities in total consumer expenditures negative effect and in total output of the economy positive effect with belgium a small economy there was no impact of the trade position changes in political institutions have affected agricultural protection democratic reforms which induced a significant shift in the political balance towards agricultural interests such as the introduction of the one man one vote system led to an increase in agricultural protection the integration of belgian agricultural policies in the common agricultural policy in 1968 coincided with an increase in protection ceteris paribus both institutional factors related to changes in access to and information about the decision making at the eu level and structural changes in the agricultural and food economy may explain this effect

measuring the social costs of suboptimal combinations of policy instruments a general framework and an example abstract since most agricultural programs employ two or more policy instruments simultaneously it is notable that little research has attempted to find optimal instrument combinations and no research exists which evaluates the social costs unrealized benefits of combining instruments suboptimally in our paper we report a simple and feasible method to find optimal policy instrument combinations and we provide the first general formal approach to measuring the social costs of suboptimal policy instrument combinations our approach is illustrated in an analysis for five major u s crops corn feed grains wheat rice cotton the simple model we employ for the illustration suggests that except for the feed grains program the observed programs combined policy instruments quite suboptimally we conclude that agricultural economics research now can and should begin placing increased emphasis on studying optimal policy instrument combinations

industry self regulation without sanctions the chemical industry s responsible care program industry self regulation the voluntary association of firms to control their collective action has been proposed as a complement to government regulation proponents argue that the establishment of

tax incidence in differentiated product oligopoly abstract we analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price setting bertrand firms both taxes may be passed on to consumers by more than 100 percent and an increase in the tax rate can increase short run firm profits and hence the long run number of firms we provide summary conditions for these effects to arise the conditions depend on demand curvatures and are written in elasticity form surprisingly the analysis largely corroborates cournot results with homogeneous demand

the political economy of u s wheat legislation bruce a babcock colin a carter and andrew schmitz both taxpayer subsidies to u s wheat producers and domestic deadweight losses increased as a result of the u s wheat program adopted in 1985 a calculation of the costs and benefits of alternative wheat policies shows that mandatory production controls with no taxpayer expense could have made wheat producers as well off as the adopted policy becker s theory of competition among interest groups and peltzman s theory of the equilibrium amount of regulation are shown to be consistent with the observed policy choice if the list of affected interest groups includes agricultural input suppliers and grain marketing firms i introduction every five years congress drafts new farm legislation dictating the provisions of commodity programs for cotton and the major food and feed grains for the subsequent five years from 1973 through 1985 the primary features of the commodity programs were guaranteed farm prices and government stockholding activities deadweight losses from the programs during this time were minimal market prices were generally higher than the government defended price floors because of a booming export market legislated increases in commodity support prices combined with a severe drop off in the demand for agricultural exports beginning in 1982 increased the economic costs of the commodity programs the u s price floor became the world price for wheat cotton and corn grain stocks accumulated while government payments to u s farmers grew to unprecedented levels most agricultural interest groups in 1984 agreed that an overhaul of agricultural policy was necessary supporters of large levels of production and exports wanted to stimulate the demand for exports by eliminating price floors others felt that the united states should reduce budgetary costs by using direct supply controls to raise farm prices the clear winners in the new 1985 farm bill were the proponents of maintained production levels and expanded exports the new policy froze the relatively high supply prices received by farmers while simultaneously lowering price floors becker 1983 argues that two forces mainly determine the outcome of policy debates the first following stigler 1971 and peltzman 1976 is the relative efficiency with which interest groups exert political pressure interest groups that are efficient in exerting political pressure can increase the subsidization or decrease the tax burden of their constituents the second force is the extent of deadweight losses associated with proposed policies those policies with lower deadweight losses are ceteris paribus more likely to be adopted for the simple reason that less tax needs to be collected from losing interest groups for given transfers to winning groups gardner 1987 finds empirical evidence that both the ability to redistribute efficiently and the effectiveness of political organizations help explain which farm commodities have received the most government support since 1930 his study provides little insight however into which force is more important in determining the type of redistribution policies that are ultimately adopted for a given commodity an examination of the wheat program adopted in the 1985 farm bill and alternative policies that were rejected provides an opportunity to determine whether the efficiency of programs or the political prowess of interest groups is more important in determining policy outcomes this task requires a calculation of the magnitudes and the distribution of costs and benefits of the chosen policy and alternative policies costs and benefits are calculated for 1 a continuation of the 1981 farm bill policies through 1986 1990 2 the adopted 1985 farm bill policies and 3 mandatory production controls all three alternatives are examined relative to a laissez faire policy whereby the u s government has no direct involvement in agriculture

corporate social responsibility theories mapping the territory the corporate social responsibility csr field presents not only a landscape of theories but also a proliferation of approaches which are controversial complex and unclear this article tries to clarify the sit uation mapping the territory by classifying the main csr theories and related approaches in four groups 1 instrumental theories in which the corporation is seen as only an instrument for wealth creation and its social activities are only a means to achieve economic results 2 political theories which concern themselves with the power of corporations in society and a responsible use of this power in the political arena 3 integrative theories in which the corporation is focused on the satisfaction of social demands and 4 ethical theories based on ethical responsibilities of corporations to society in practice each csr theory presents four dimensions related to profits political performance social demands and ethical values the findings suggest the necessity to develop a new theory on the business and society relationship which should integrate these four dimensions

consequences of discretion in the formation of commodities policy abstract in a simple model of endogenous primary commodity price support policy i policy is affected by private inventories and ii private inventories are affected by speculative attempts to forecast policy the interaction between these two forces is rich yielding bubbles and extrinsic volatility thus helping to explain some odd episodes observed in commodity markets in addition under some conditions a government that wishes to support the price but is unable to commit to future action may be impotent and a government that does not want to support the price may be trapped into doing so by speculative activity

persistent underinvestment in public agricultural research abstract it is often argued that public support of agricultural research is inadequate however the empirical papers that support this hypothesis rarely reflect formal behavioral theory capable of explaining this phenomenon this paper presents a theory that explains underfunding namely that funding agencies respond too slowly to secular changes in the value of research a model of farmer and funding agency behavior is presented and shown to imply that actual research funding will be consistently smaller than optimal funding the assumptions and results of the model are explained in terms of the institutional literature on public agricultural research agencies

determinants of the u s wheat producer support price do presidential elections matter the paper s focus is on the determinants of the u s wheat producer support price the results of the time series analysis suggest that this price is largely determined by the previous price the expected u s share in world exports and expected program costs presidential elections also influence u s wheat price policies all other things being equal the support price tends to be lower in election years than in other years this suggests that small interest groups relative political economic power may be less pronounced in election years if they do not succeed in positioning themselves on the political economic market such that they contain the potentially decisive voter

objectives and constraints of government policy the countercyclicity of transfers to agriculture estimates of government transfers to typical u s corn wheat and cotton farms are regressed on estimates of market derived farm income to show that u s farmers receive greater government transfers when they face relatively unfavorable market conditions this transfer countercyclicity is shown to be unrelated to potential deadweight losses constraining government transfers it is argued that prevailing political economy models have difficulty explaining transfer countercyclicity because they focus on political agents constraints to the neglect of political agents objectives

stop and go agricultural policies with a land market this article studies the design of farm policy in the presence of asymmetric information about farmers productivity a government objective to insure farmers a minimum parity income an endogenous land rent and diminishing returns on alternative nonprogram crop land uses in this setting acreage set asides are never part of an optimal farm policy although compensated acreage limits are when there are new farmer entrants who cannot be excluded from farm programs optimal policy takes the form of a pure voluntary acreage limitation or buyout program in which high cost producers participate and low cost producers do not copyright 2003 oxford university press

crop insurance in a political economy an alternative perspective on agricultural policy lawmakers often subsidize farmers in times of financial distress this article models this political impulse as a constraint on government farm policy describing how ex ante government farm insurance can deter ex post disaster relief and improve production incentives by countering the moral hazard that otherwise prevails absent ex ante government policy ex post relief takes the form of revenue insurance which prompts excessive entry into farm production and under production by operating farmers ex ante government policy can raise economic and political welfare by buying out low productivity farmers and offering profitable farmers a combination of revenue insurance price supports and a program participation fee copyright 2003 oxford university press

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

design competition through multidimensional auctions this article studies design competition in government procurement by developing a model of two dimensional auctions wherefirms bid on both price and quality and bids are evaluated by a scoring rule designed by a buyer three auction schemes first score second score and second preferred offer are introduced and related to actual practices if the buyer can commit to a scoring rule in his best interest the resulting optimal scoring rule underrewards quality relative to the buyer s utility function and implements the optimal outcome for the buyer underfirst and second score auctions absent the commitment power the onlyfeasible scoring rule is the buyer s utility function under which 1 all three schemes yield the same expected utility to the buyer and 2 first and second score auctions induce the first best level of quality which turns out to be excessive from the buyer s point of view

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

rationing and rent dissipation in the presence of heterogeneous individuals this paper discusses the implications of rationing by waiting when consumers have different time costs and personal valuations the joint distribution function of time costs and personal valuations is used to characterize market equilibrium it is argued that under certain conditions an increase in the variance of time costs will reduce the dissipation of rent furthermore it is shown that introducing a secondary market for a rationed good does not necessarily improve welfare because total surplus under rationing by waiting depends more on the variance than on the level of time costs and personal valuations the model is also used to discuss other institutions that involve rent seeking activities such as the patent system and import quotas

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

causes of u s farm commodity programs this paper i s an attempt to explain variations by commodity in producer protection afforded by farm price support programs since the1930s particularly emphasized are theideas that these programs are essentially income redistributional measures and that given political forces the programs are attempts to redistribute efficiently variables associated with the cost to producers of generating political pressure and the social cost deadweight losses of redistribution are both found to be empirically important copyright 1987 by university of chicago press

a political economic analysis of u s rice export programs to japan and south korea a game theoretic approach the uruguay round agreement on agriculture ur has contributed to the increase in u s and world rice trade since 1994 despite this the japanese and korean rice markets continue to be characterized by high levels of trade intervention this paper attempts to analyze both import markets incorporating econometric estimates and public choice theory in a game theoretic framework various scenarios are analyzed the results show that the overall nash equilibrium occurs with a 4 tariff reduction for japan and korea under the u s market development program which includes the market access program and foreign market development program

the political ideology of food abstract using data from a survey of over 700 americans we sought to measure and investigate the nature of citizen s political ideologies in relation to food results reveal that a majority of respondents can be classified as food statists desiring more government action in the realm food and agricultural relative to the status quo people s ideologies with regard to food were multidimensional falling along lines related to food health and quality food safety and farm subsidies respondents were most in favor of additional government action related to food safety food ideology was related to conventional measures of political ideology with for example more liberal respondents desiring more government involvement in food than more conservative respondents but the relationship was far from determinative suggesting food ideology represents a unique construct in its own right

what drives china s new agricultural subsidies summary china s agricultural policy has undergone a fundamental transformation in the four decades since the introduction of market reforms in 1978 and now involves a wide array of policy instruments that range from output and input subsidies to public infrastructure expenditures this article analyzes the political economic determinants of china s agricultural subsidy changes using producer subsidy equivalents pses drawn from annual data from 1984 to 2015 on 16 agricultural commodity sectors that include multiple policy instruments empirical results indicate that national factors such as high rates of economic growth and a lower share of agriculture in the economy have been the primary drivers of increases in pses and that larger more geographically concentrated agricultural sectors are more likely to be subsidized at a higher pse rate finally china s joining the world trade organization in december 2001 led to significant increases in pses that were not already explained by internal national or commodity specific factors in essence china s agricultural subsidy programs and levels increasingly resemble those of developed countries primarily as a result of economic transformation and the ability to structure agricultural policies within the wto rules moreover this article predicts that agricultural subsidies will trend slightly upward in the next decade and that the strongest opportunities to export to china will be in animal products or grains that are utilized for feed or processed foods where the levels of subsidies are predicted to increase but remain lower than for traditional food crops

what do campaign contributions buy deciphering causal effects of money and votes in the 1987 1988 election cycle political action committees pacs spent 176 6 million on candidates who competed for a seat in the house of representatives what do pacs buy when contributing this money if campaign contributions are rational allocations of a contributor s income campaign expenditures could increase both the probability that the contributor s preferred candidate is elected and the likelihood that if elected the candidate will vote in the interest of the contributor most studies do not find that incumbents expenditures have a significant positive effect on the number of votes incumbents receive 11 14 15 17 29 the evidence that contributions influence congressional votes is mixed most studies find weak or no support for this hypothesis for example kau rubin and keenan 17 find that contributions from businesses mattered in only two of the eight votes they analyzed others argue that campaign expenditures play no important role in the voting decision of congressmen 5 9 12 31 the lack of finding of significant effects of money on votes has been explained with the need for better models to explain campaign contributions 5 however the theoretical developments of for example ben zion and eyton 4 bental and ben zion 3 and baron 2 have not been incorporated in the empirical analysis of the effect of campaign contributions on the voting behavior of legislators empirical models that test this relationship must allow for the endogeneity of campaign contributions for the dichotomous nature of the dependent vote variable and the nonnegativity constraint of campaign contributions most empirical work in this area utilize models that do not incorporate these restrictions in this study i plan to incorporate these aspects of the data generating process into a more detailed model of the effects of campaign contributions on congressional votes of all the reported empirical studies on this issue only chappell 5 uses a model which can properly assess the impact of money on votes chappell finds that campaign contributions do not affect votes in congress when his more detailed econometric technique is used the best test of the theory results if votes have a clear economic payoff to contributors benefits of the votes are concentrated and costs are

indirect taxation in vertical oligopoly this paper analyzes the effects of specific and ad valorem taxation in an industry with downstream and upstream oligopoly we find that in the short run i e when the number of firms in both markets is exogenous the results concerning tax incidence tend to be qualitatively similar to models where the upstream market is perfectly competitive however both over and undershifting are more pronounced potentially to a very large extent instead in the long run under endogenous entry and exit overshifting of both taxes is more likely to occur and is more pronounced under upstream oligopoly as a result of this a tax increase is more likely to be welfare reducing we also demonstrate that downstream and upstream taxation are equivalent in the short run while this is not true for the ad valorem tax in the long run we show that it is normally more efficient to tax downstream

a critical assessment of the political preference function approach in agricultural economics abstract the policy preference function ppf approach has become popular with economists seeking to explain the origin of government policies in this paper a distinction between positive and normative work with the ppf concept is made positive work is shown to suffer from a variety of shortcomings including the misspecification of traditional ppfs and the failure to consider the importance of institutions constraints and the interaction between different commodity policies these weaknesses are reflected in the counter intuitive results of a simple ppf model designed to reflect the interaction between the ec s wheat and barley policies furthermore it is demonstrated that ppf weights change as a result of both political preferences and market parameters hence changes in ppf weights cannot be attributed to changes in preferences alone test of the axioms of revealed preference theory are used to demonstrate that even though ppf weights derived for the ec s wheat and barley markets have fluctuated considerably since the early 1970s we are not able to conclude that there has been a shift in political preferences the paper concludes with some comments about the use of ppfs in a normative framework the underlying assumption that policy makers optimise seems not surprisingly often to lead practitioners to the conclusion that observed policies are not so bad after all economists should also beware of the tendency to overlook possible differences between the ppf and the social welfare function

a roll call analysis of the endangered species act amendments public choice economics view legislative process as a transaction in the political market interest groups demand regulation in their favor and lobby lawmakers the lawmakers analyze an assortment of factors and supply legislation to the winning group thereby maximizing their rent from the political market this article examines endangered species act esa amendments from a public choice perspective congressional voting on the esa amendments are assessed using a model based on political incentive and ideology the results show that the lawmakers voting behavior is correlated with their party affiliation ideology and several characteristics of their home state such as number of endangered species proportion of urban population contribution of the natural resources and construction sectors in gross state product and geographical location copyright 2001 oxford university press

estimating statistical properties of political economic decisions revelation of criteria implicit in setting policy is addressed in a political economic framework that includes identification and estimation of unknown parameters in the presence of multiple sources of uncertainty policy formation is viewed as an optimization process under which the government maximizes a criterion function subject to market constraints a method for estimating political criterion function weights and their associated standard errors over multiple time periods is presented the approach is illustrated with an empirical example from japanese rice and wheat trade policy

intervention bias in agricultural policy abstract this paper re examines the motivation for government intervention in agriculture to support farm prices and incomes a model is outlined in which the government has a preference for higher farm incomes but fails to provide farmers with the socially optimal level of price support even when one accepts the government s income redistribution goals as a valid reflection of social preference it is shown that agricultural policy has an intervention bias government price supports generally are higher than would be socially optimal the source of the intervention bias is a time inconsistency in optimal agricultural policy formation caused by the government s inability to precommit to a rule for setting future price support levels simulation results indicate that in some circumstances the intervention bias in agricultural policy can be substantial

the political economy of public research investment and commodity policies in agriculture an empirical study the paper tests a political economy theory of simultaneous government decision making on income redistribution through commodity policies and on public research investment in agriculture we use data from 37 countries on agricultural protection and public agricultural research expenditures pari the empirical results are consistent with the political economy hypotheses the analysis suggest that structural changes in the economy have important effects on the political incentives for governments not only to subsidize or tax farmers but also to invest in public agricultural research furthermore the analysis supports the hypotheses that the impact of such structural changes on government decision making on pari is non linear and conditional on other factors regarding the impact of political institutions the results suggest that more democracy neither leads to more distortionary transfers agricultural protection nor to lower investment in public goods pari

the cotton influence index an examination of u s cotton subsidies given the lack of a bill or amendment specific to cotton we introduce a cotton influence index to capture legislators influence in championing the cause of the cotton growers during the hearings of the farm security and rural investment act of 2002 regression analyses reveal a relationship between cotton influence index and campaign contributions cotton farmland party affiliation and ideology tobit analysis indicates a significant relationship between different actions and participations by representatives to advance the interest of cotton that is components of this index and their future cotton political action committees pacs contributions to them copyright 2006 oxford university press

renewable resource policy when distributional impacts matter the standard assumption in bioeconomic resource models is that optimal policies maximize the present value of economic surplus to society this assumption implies that regulatory agencies should not be concerned with the distributional consequences of management strategies both contemporary welfare theoretic and rent seeking approaches suggests distributional issues are important in designing resource management policies this paper explores resource management when the managing agency has preferences defined over the economic welfare of various groups with a direct economic interest in the use of resources policy schemes consistent with this approach are derived and compared with standard results

a benefit cost analysis of u s agricultural trade promotion subsidies for nonprice export promotion can harm domestic consumers by increasing price in the domestic market and by diverting funds from domestic market promotion taking these consumer impacts into account we find that federal expenditures for nonprice export promotion of farm products may be too high

the evolution of farm programs and their contribution to agricultural land values the economic environment of agricultural producers has been influenced by formal u s agricultural policy for more than seventy years among the first pieces of new deal legislation proposed by incoming president franklin d roosevelt was a farm program designed to address declines in crop prices and net farm income key features of the agriculture act of 1933 included mandatory price support for specified commodities direct subsidy payments to farmers and supply controls farm programs once viewed as temporary and supplementary to agricultural earnings are increasingly viewed as permanent and of major proportion gardner examined the relationships between u s farm commodity programs and u s farm structure while others see sumner for concept evidence and implications have examined farm programs and specific crops gardner 2002 and weersink et al analyzed the effects of farm program programs upon land values these studies examined various aspects of agricultural policy including whether farm program payments have enhanced land prices and landowner wealth rather than the welfare of producers while it would seem logical that revenueenhancing farm programs would increase land values reliably estimating the magnitudes of farm program effects upon land values is an empirically challenging task both statistical and budgeting based methodologies have been used to estimate the share of land prices generated by farm program payments statistically based studies are complicated by the fact that both real per acre crop receipts

the fable of the bees revisited causes and consequences of the u s honey program abstract in his 1973 paper steven cheung discredited the fable of the bees by demonstrating that markets for beekeeping services exist and function well although economists heeded cheung s lessons policy makers did not the honey program has operated for over 50 years supporting the price of honey through a variety of mechanisms its effects were minor before the 1980s but then became important with annual government expenditures near 100 million for several years reforms of the program in the late 1980s reduced its market effects and budget costs returning it to its original role as a minor commodity program although the 1996 farm bill formally eliminated the honey program it was reinstated in the 2002 farm bill we measure the historical welfare effects of the program during its various incarnations examine its frequently stated public interest rationale the encouragement of honeybee pollination and interpret its history in light of economic theories of regulation

subsidizing and taxing business procurement abstract this paper studies the effect of a subsidy or tax on a market where a downstream manufacturer uses a competitive tender to procure inputs from upstream suppliers subsidizing input production can result in input price decreases that are greater than the effective decrease in marginal costs that is overshifting occurs when the size of the subsidy is not too large the downstream firm can enjoy an increase in profits greater than the government expenditure on the subsidy a relatively weak sufficient condition for these results to hold is that suppliers earn a positive profit margin on the marginal unit sold before taking into account any subsidy payment stronger sufficient conditions tailored to each result are provided

are government transfers efficient an alternative test of the efficient redistribution hypothesis the efficient redistribution hypothesis says that no available government policies are pareto superior to observed government policies efficient redistribution from government policy is a central tenet of much recent theoretical and applied political economy literature in this paper limitations of previous attempts to test the efficient redistribution hypothesis are discussed and an alternative test of the efficient redistribution hypothesis that uses vector optimization theory and bootstrap methodology is presented

the economic effects of supply controls the simple analytics of the u s peanut program a gricultural commodity programs employ a wide variety of policy tools to regulate u s agriculture price supports are the most common form of intervention but rights to sell at the supported price are allocated very differently under different commodity programs under recent feed grain programs for example the right to sell at the supported price is linked to acreage set asides agreements not to produce on certain acres in other programs sales by individual farmers are controlled under marketing orders sponsored by the u s department of agriculture usda 2 a third method is through permanent maketing quotas that directly limit output only two major commodity programs those for tobacco and peanuts currently allocate the right to sell in this way the peanut program is the subject of this article 3

a policy preference function for government intervention in the u s wheat market this paper estimates a policy preference function that explains the government s choices of target prices government held wheat stocks and public wheat research funding the policy preference function depends on producers surplus consumers surplus and budget expenditures an important innovation in this paper is the inclusion of interactions between public research expenditures and other public policy variables results indicate that the government places a premium of 25 to 45 on the welfare of wheat producers of relative to budget expenditures while wheat consumers welfare is discounted as much as 50 relative to budget expenditures the purpose of this paper is to provide an explanation of government commodity programs stock accumulations and research expenditures in the u s wheat sector the explanation is based on a policy preference function ppf that depends on producers surplus consumers surplus and budget expenditures it is assumed that target prices reductions in or additions to government stocks and public research expenditures are chosen to maximize the policy preference function the central contribution of the paper is the estimation of a function that is consistent with the observed government interventions in the u s wheat market that is the paper explains the observed target prices government sales and public research expenditures as rational behavior by a government which seeks to maximize the estimated policy preference function the approach in this paper is based on the political interest group theories of peltzman and becker applications of these ideas to agriculture include rausser and freebairn s description of the beef industry gardner s 1985 analysis

re examining the reported rates of return to food and agricultural research and development comment hurley rao and pardey 2014 argue to replace the internal rate of return with the modified internal rate of return for the evaluation of public research investment the crux of their argument is that the internal rate of return assumes intermediate cash flows can be reinvested or borrowed at same return as the initial investment which is generally not correct or reasonable page 1492 this article first demonstrates that reinvestment decisions are embodied in the project specification and that the internal rate of return makes no inherent reinvestment assumption the article then clarifies the algebraic properties of the marginal internal rate of return and the reinvestment implications of the internal rate of return and modified internal rate of return within the context of public agricultural research evaluation

efficient redistribution through commodity markets efficiency in redistribution is measured in terms of deadweight loss generated per dollar of economic surplus transferred between consumers and producers of a commodity by means of market intervention the implications of supply and demand elasticities for efficiency in redistribution are examined with special attention to the comparison of production control and deficiency payment programs the results may be used to aid in the evaluation of commodity programs and as a basis for consideration of the hypothesis that observed policies are efficient given the political power of interest groups

environmental regulations transfers and trade theory and evidence abstract this paper develops a theory of compensation of producers for the costs associated with environmental regulations we show that the existence of transfers can give counter intuitive effects of environmental policy on both output and trade flows in particular the compensation obtained by producers neutralizes the effect of environmental policy on output and consequently on trade flows this may help explain why previous empirical research has found weak evidence that environmental regulations affect trade patterns the theory is tested using agricultural sector data the evidence supports the hypothesis that environmental regulations and transfers are positively correlated

evaluating the behavior of international cartel members some phenomena of interest in international trade can be understood by looking at only one country pushing others into the background sometimes though to preserve the essence of a problem one must attempt to take explicit account of the interaction of nations this viewpoint invites one to treat a collective body in this case a group of countries as a deciding unit there is no shortage of applications that call for such thinking among them are the gatt negotiations and nafta international commodity agreements and international cartels in each of these the idea of treating the collective as an organic decision maker is alluring and to be sure much has been gained in this fashion there are also dangers that attend adopting such a modeling strategy our purpose is to lay out these dangers their source and effects and then to introduce briefly some remedies that have become available lately does a group optimize the essence of the methodology of economics inheres in the treatment of decision makers as optimizers attributing to them an objective criterion and the impulse to behave optimally can this methodology be used in studying group decision making arrow showed that in a certain formal sense it can

the welfare consequences of directly unproductive profit seeking dup lobbying activities price versus quantity distortions abstract this paper is a contribution to the growing literature on the theory of what bhagwati 1982 has christened the theory of dup activities these are activities that use up real resources in making profits i e income without producing directly or indirectly a good they result therefore in the contraction of the availability set defined on goods for one generic subset of such dup activities namely distortion triggered lobbying activities the paper establishes asymmetrical propositions on the possibility of such dup lobbying resulting in a paradoxical improvement of welfare

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

from senators to the president solve the lumber problem or else we use key events associated in the two decade long u s canada softwood lumber trade dispute to present the dynamic relationship between u s congress and the administration in the formation of international trade policy we find that the executive branch of the u s government responded quickly to several letters from a group of u s senators demanding a solution to the lumber problem a roll call analysis is used to identify factors influencing senators willingness to sign these letters and pressure the president on behalf of the u s lumber industry the results show that the economic importance of the lumber industry in a senator s home state is positively correlated with signatory on these letters and that the presence of a large housing industry in a state makes a senator less likely to sign these letters

commodity taxation and imperfect competition a note on the effects of entry abstract this paper looks at the effects of allowing the number of firms to vary in seade s model of oligopoly and taxation we show that the normative and positive consequences of a specific commodity tax are affected by entry in significant ways

market power and cartel formation theory and an empirical test abstract antitrust enforcement makes it difficult to test theories of cartel formation because most attempts to form cartels are blocked or kept secret however federal laws allow u s produce growers to operate marketing cartels through devices called marketing orders these cartels use quantity controls and quality standards to raise prices of fresh produce some growers have adopted marketing orders and others have not this paper develops and tests a positive theory of the adoption of marketing orders the theory suggests that growers in a region are more likely to adopt a marketing order if the demand for fresh produce is inelastic the growers market share in the fresh market is large there are barriers to entry and expansion the fraction of the output the growers ship to the fresh market is not too large or too small growers are homogeneous and large cooperatives exist probit analyses support these hypotheses

agricultural policies in the presence of distorting taxes this article analyzes how distortionary factor taxes affect the welfare impacts of production subsidies production quotas acreage controls subsidies for acreage reductions and cash transfers to farmers pre existing taxes substantially raise the costs of all these policies these additional costs reflect the welfare losses from financing certain policies by distortionary taxes they also reflect interactions with factor markets caused by changes in the costs of producing agricultural output previous studies ignore the latter types of effect consequently they significantly overstate the costs of production subsidies and understate the costs of production quotas acreage controls and subsidies for acreage reductions

politics and social costs estimating the impact of collective action on hazardous waste facilities firms that generate negative externalities may consider the effects of their location on the surrounding environment because of the right of their prospective neighbors to demand compensation for pollution and raise the transaction costs of location since communities vary both in the value individuals place on the environment and in the ability of residents to organize politically locations that generate the least political opposition may not be the locations that result in the lowest externalities this article tests whether the degree to which firms internalize their externalities depends on the ability of affected communities to engage in collective action the results indicate that firms processing hazardous waste when deciding where to expand capacity do take into account variations in the potential for collective action to raise their costs

agricultural policy adjustments in the korean rice economy abstract a political preference function is used to endogenize government actions in a simultaneous equation model for south korean rice policy the effects of economic changes on rice pricing decisions through estimated political weights are tested to improve our understanding of policy adjustments in that country and open the way for further research in east asia

explaining state bans on corporate farming state laws banning corporate farming present a puzzle for a rent seeking explanation of political outcomes since family farmer proponents may receive no direct benefit from these bans an explanation developed here is that these farmers benefit indirectly forestalling corporate entry preserves the farm political coalition structured around those cooperatives patronized by family farmers and so indirectly preserves federal subsidies and supply restrictions that the incidence of state bans is positively related to the importance of federal farm programs the importance of cooperatives and the homogeneity of farmers within a state is consistent with this indirect rent seeking explanation

the calculation of returns to research in distorted markets reply abstract most of the emperical literature calculating rates of return to publicly sponsored research assumes that research is the only relevant government intervention for most countries this assumption is untenable this paper shows that improperly measuring government inducedmarket distortions can severely bias research rate of return calculations if the interaction between successful research and other government interventions increases the cost of the other interventions then neglecting market distortions unambigously increases the calculated rate of return three examples of government induced distortions show that the magnitude of the upward bias in calculated rates of return can be extremely large in some cases more than 100 percentage points a normative implication is that governments should account for interactions between research and price interventions when determining research support levels a positive implication is that existing government research funding patterns are more readily explainable as reasonable behavior by a government that accounts for these interactions

interest group competition over policy outcomes dynamics strategic behavior and social costs this paper analyzes a two period model of interestgroup competition between two groups to affect thepolicy outcome the paper characterizes the subgameperfect equilibrium and considers the welfareimplications of the model the subgame perfectequilibrium to this game is allocatively efficient ifand only if the initial equilibrium is allocativelyefficient and interest groups are equally adept atproducing political pressure when rent seeking isconstitutionally protected the notion of rent seekingconstrained efficiency is defined as the cooperativesolution to the rent seeking game it is shown that arent seeking constrained efficient equilibrium isattainable by forcing winners in political competitionto fully compensate losers

eu agri environmental programs and the restaurant table effect the share of agricultural area enrolled in eu agri environmental programs varies significantly between eu member states these national differences are explained based on a model that reflects both that these programs internalize externalities and the political economy we identify six factors that affect the extent to which agri environmental programs are implemented environmental benefits opportunity costs of participation budgetary pressure the share of program expenditures financed by the eu the political weight attributed to farmers at the national and the political influence of each country at the eu level in addition we demonstrate that if the policy decision making process is noncooperative at the eu level countries that contribute less to the eu budget will ceteris paribus implement more programs using data of four years and feasible generalized least square methods we are able to confirm our theoretical results including a noncooperative behavior of eu member states

protectionism versus risk in screening for invasive species abstract i examine the extent to which enforcement of a biosecurity import restriction us border inspections for foreign pests and diseases is used as a protectionist trade barrier the parameters of a structural model of border inspection are estimated using a detailed dataset documenting the outcome of us agricultural border inspections i find that inspections are conducted in a manner that places an implied welfare weight on domestic producers relative to consumers ranging from 1 to 1 63 i also find evidence that the inspection agency takes terms of trade into account when inspecting agricultural imports these results suggest that border inspections are used as a protectionist non tariff barrier

an empirical analysis of participation in us government farm programmes factors affecting the participation of individual kansas farms in government programmes are considered a sample drawn from over 1600 kansas farms for nine years is used in the context of a simultaneous equation tobit regression to investigate the effects of various factors on the probability and expected level of participation in farm programmes the results suggest that differences in farm sizes incomes types and farming practices influence participation in government programmes small sole proprietor livestock operations with low debt levels receive the lowest levels of support conversely large corporate crop farms receive the highest levels of government support

stochastic dominance and uncertain price prospects since the seminal and simultaneous publications of hadar and russell 6 and hanoch and levy 8 there has been a virtual explosion of papers investigating implications of stochastic dominance rules for decisions under uncertainty dominance principles have important applications to portfolio choice capital budgeting and financial intermediation stochastic dominance can also be applied to investment and production decision problems under uncertainty in these areas both overall and marginal impacts of uncertainty have received wide attention 2 the emphasis in consumer welfare analysis under uncertainty has been on the ranking of different price prospects ranking of price prospects is more complicated than that of income prospects for two related reasons first due to differences in ordinal preferences among consumers the second degree stochastic dominance rule on price prospects does not yield a unanimous ranking among risk averse consumers thus waugh 17 massell 12 and samuelson 14 have focused on the ranking of price prospects for a single consumer or consumers with identical ordinal preferences second there is no a priori reason for income risk averse consumers to exhibit aversion to fair price risks specifically the indirect utility function of an income risk averse consumer is neither concave nor convex in prices indirect ways of comparing consumer welfare under alternative price prospects via expected consumer surplus expected compensating variation or expected equivalent variation have thus been investigated in the literature expected consumer surplus ecs has been particularly popular for ranking certain and uncertain price prospects 3 however turnovsky shalit and schmitz 16 showed that the ranking

the icelandic banking crisis a reason to rethink csr in the fall of 2008 the three largest banks in iceland collapsed with severe and lasting consequences for the icelandic economy this article discusses the icelandic banking crisis in relation to the notion of corporate social responsibility csr it explores some conceptual arguments for the position that the icelandic banking crisis illustrates the broad problem of the indeterminacy of the scope and content of the duties that csr is supposed to address in particular it is suggested that the way the banks in question conceived of csr i e largely in terms of strategic philanthropy was gravely inadequate it concludes by proposing that the case of the icelandic banking crisis gives us a reason to rethink csr

on the political economy of state highway expenditures some evidence of the relative performance of alternative public choice models this paper explores the extent to which the public demand for roads and or power of special interest groups determines road expenditures at the state level using an extension of the methodology developed in congleton and shughart 1990 reduced form models of median voter demand special interest group equilibria and a combined model are estimated using cross sectional state data from the united states we generally find support for the hypothesis that voting matters the pure median voter models have a better fit than the pure special interest group models moreover in our combined model we find that variables from the median voter model can not be dropped without significantly reducing the combined model s fit

differences in social and public risk perceptions and conflicting impacts on point nonpoint trading ratios if stochastic nonpoint pollution loads create socially costly risk then an economically optimal point nonpoint trading ratio the rate point source controls trade for nonpoint controls is adjusted downward a risk reward for nonpoint controls encouraging more nonpoint controls however in actual trading programs ratios are adjusted upward in response to nonpoint uncertainties a risk premium for nonpoint controls this contradiction is explained using a public choice model in which regulators focus on encouraging abatement instead of reducing damages the result is a divergence of public and social risk perceptions and a trading market that encourages economically suboptimal nonpoint controls copyright 2001 oxford university press