u s sweeteners combating excess consumption with an excise tax obesity is a public health problem in the united states that has been linked to excess sweetener consumption the american heart association aha recommends no more than 6 9 teaspoons capita day while the u s food and drug administration fda recommends 200 calories capita day of caloric sweetener consumption both recommendations are well below the reported 2016 sweetener consumption levels we quantify the input tax rates needed to reduce the current excess sweetener consumption level to the aha and fda recommended standards we calculate the joint tax in the united states on two major sweeteners sugar and high fructose corn syrup hfcs to be 31 and 24 cents per pound respectively based on the aha standard and 19 and 17 cents per pound respectively using the fda standard these taxes would be roughly the magnitude of the existing sugar and hfcs prices in both cases the tax incidence on producers is much smaller than on consumers our focus is very different from past studies in that it deals with the effect of taxes on inputs to meet the recommended target rather than a selective tax sugar sweetened beverage tax if a sweetener tax were implemented u s sugar and hfcs producers would lose us 398 us 489 and us 683 us 844 million per year respectively

political economic markets perts and pests in food and agriculture j i lyniversity of california berkeley jjept of agricultural and resource economic l working paper al cljdare i lorking paper 0 231 politic eco lic l rxets a d pests i j food l ti achiculture by per ts cordon c rausser ja nlnl tt junot tlon a riii ent st ticn giannini fou 1cl itiol1of ar ricultllrnj econo ll i cs july 11 w

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

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

political economy of u s sugar policies this article examines political economic decision making with respect to u s sugar policies it evaluates the responsiveness of target prices and import quotas levels to changes in a the economic surpluses of market participants and b the federal budget deficit results indicate a weak linkage between sugar producer surplus and subsequent target prices levels but a strong linkage between the federal budget deficit and subsequent import quota levels the influences of sugar users corn sweetener producers and foreign countries are also examined

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

searching for the correct benefit estimate empirical evidence for an alternative perspective this paper contrasts the results of the contingent valuation hedonic price and property damages avoided valuation techniques each technique was used to estimate the value of flood risk reduction from the construction of a flood control project voting behavior in a referendum called specifically for the provision of the project was used to further interpret the results from the three valuation studies substantial differences were found between the estimates in explaining these differences an alternative perspective on the current debate over the validity and accuracy of nonmarket value estimates is offered

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

a note on the estimation of the demand for sugar in the usa in the presence of measurement error in the data inaccuracy in the measurement of the price data for the substitute sweeteners for sugar is a problem encountered in the estimation of the demand for sugar two diagnostics are introduced to assess the effect that this measurement error has on the estimated coefficients of the sugar demand relationship the regression coefficient bounds diagnostic is used to indicate a range in which the true price responsiveness of consumers to changes in the price of sugar substitutes lies the bias correction factor is computed to evaluate the magnitude of the overestimation of the responsiveness of the quantity of beverage sugar and non beverage sugar demanded to a change in the price of sugar

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

endogenous price policies and international wheat prices comment in a 1983 article in this journal sarris and freebairn claim to model international wheat prices as cournot equilibrium prices resulting from the interaction of national excess demand functions national pricing policies are determined so as to maximize a domestic welfare function specified as a weighted sum of producer and consumer surplus government revenue and a price variability measure the function is maximized subject to the pricing policies of all other countries in the sarris and freebairn model each country assumes that any pricing policy which it implements such as the imposition of a tariff will not affect the world price we contend that this assumption is not consistent with the usual determination of a cournot equilibrium in the cournot oligopoly model each firm takes account of the price implications of the output it sets therefore we reformulate sarris and freebairn s model to account for the impact of policies on the world price and recalculate the implicit welfare weights for wheat trading countries in the traditional cournot oligopoly model each firm takes account of production levels set by it and other firms although each naively expects no response from its rivals the cournot nash equilibrium is a point at which no trader acting unilaterally can do better than playing its optimal strategy given that all other traders are playing their optimal strategies interaction between the traders leads to convergence to an equilibrium from which none would want to move in contrast to the traditional model sarris and freebairn derive their solution on the simplifying assumption that every trading country takes the world price as given this implies that each country is concerned with domestic objectives and is not concerned with other countries reactions to its policies in other words we posit a cournot oligopoly problem p 215 in fact sarris and freebairn posit zero conjectural variations i e each trader conjectures that its rivals will not vary their policies as in a cournot model but assume no effect on world prices this latter assumption is not consistent with a cournot model in a cournot nash model traders assume that rivals do not respond to their policies although these zero conjectures are subsequently found to be incorrect although unanticipated retaliation does occur and by imposing the assumption of a given world price and that market power remains unused sarris and freebairn are led to conclude that with equal weights on all components of the welfare function the optimal policy for the country is a free trade one p 216 this conclusion is consistent with the simplifying small country assumption however it is unlikely that countries with market power will ignore it in setting tariffs after dropping this assumption our calculations presented in table 1 show that the optimal policies are nonzero even if weights are equal the method used here for obtaining the cournot nash solution involves calculating the firstorder conditions to maximize a weighted welfare function for each country the reaction functions showing how each country reacts to tariffs imposed by others can then be derived the functions can be solved simultaneously to obtain the cournotnash solution 2 consider a homogenous product traded between n countries with linear demand and supply curves

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

detecting spot price forecasts in futures prices futures markets are often described as having two important social functions first they facilitate the transfer of commodity price risk and second they provide forecasts of commodity prices the evidence that futures markets transfer price risk is irrefutable however there is some debate about the markets forecasting ability in particular forecasts based on the current spot price are often as good as those based on the futures price some economists cite a failure to detect superior forecast power in futures prices as evidence of market inefficiency see e g leuthold 1974 and martin and garcia 1981 there are at least two other explanations first there may be nothing for the futures market to forecast if the current spot price equals the true expectation of the future spot price the futures market cannot provide a better forecast second a superior futures market forecast may be obscured by the unexpected component of the realized spot price the true expectation of the future spot price is unobservable one must approximate this expectation with the actual future spot price

endogenous price policies and international wheat prices vanzetti and kennedy s herein vk comment on our earlier paper sarris and freebairn gives us the opportunity first to clarify the differences in the models to present a generalization of the analysis that includes their results as well as ours as special cases and then to point out some salient features of our model that seem to have been unnoticed by them consider our model of a homogenous commodity produced consumed and traded by n countries which are characterized by the following linear demand and supply curves notation follows vk except that we maintain the additive random variables and hence keep the time subscript

some neglected social costs of government spending in farm programs economic welfare analyses of farm programs typically assume that the direct social opportunity cost of subsidy payments is one dollar per dollar of government spending recent literature suggests that the marginal opportunity cost of a dollar of u s federal government spending is more likely to be in the range of 1 20 to 1 50 this implies that the net social costs of farm programs that involve government spending are significantly greater than the typical estimates in addition the normative efficiency ranking of alternative policies is sensitive to the marginal opportunity cost of government spending

a game theoretic model of endogenous public policies public policies are the equilibrium outcome of a cooperative game among interest groups and the policy maker this study stresses the interdependence between policies and players bargaining strengths and derives their comparative statics with respect to a changing economic environment it also provides a specification of behavioral equations consistent with the underlying bargaining process an analysis of the political economy of food and agricultural price policies in senegal illustrates the proposed framework

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

efficient income redistribution for a small country using optimal combined instruments abstract in this paper i improve gardner s surplus transformation curve framework by assuming that governments are able to vary many policy instruments simultaneously instead of only one i use my framework to find the combination of the currently used instruments which provides the most efficient income redistribution for the austrian bread grains market comparing the most efficient policy with the actual policy reveals that 464 10 6 austrian shillings were wasted i theoretically compare for a small country the transfer efficiency of every possible pair of the four major agricultural policy instruments floor price production quota co responsibility levy and deficiency payments without considering the marginal cost of public funds mcf deficiency payments cum quota equal to a fully decoupled direct income support is the most efficient policy succeeded by floor price cum quota and floor price cum deficiency payments if the mcf is taken into account the ranking crucially depends on the market parameters the transfer level and the value of the mcf for the austrian bread grains market i empirically demonstrate that given the present support level a fully decoupled direct income support redistributes income most efficiently as long as the mcf is lower than 1 17 beyond this value a floor price cum quota policy becomes more efficient a floor price cum deficiency payments policy is never superior to the floor price cum quota

gains and losses of sugar program policy options high domestic sugar prices supported by u s sugar policy have induced a significant substitution of corn sweeteners for sugar recognizing the close relationship between sugar and corn sweeteners this study applies a general equilibrium approach to evaluate the distributional effects of three different policy options i e quota tariff and deficiency payment on sugar related interest groups the results show that the current quota policy intended ostensibly to protect domestic sugar producers have hurt foreign exporters it will harm domestic sugar producers if the trend continues additionally the quota program is the most expensive of the options considered

empirical analysis of corn and soybean basis in canada the article examines the factors affecting the basis for corn and soybeans using several time series techniques to account for potential structural breaks seasonality residual serial correlation and structural breaks as well as potential endogeneity and nonstationarity the spatio temporal empirical framework is based on storage and trade theories which assume the relationship between nondelivery location s spot price and futures price of a storable commodity depends on opportunity cost of capital warehousing costs a convenience yield and shipping costs the interest rate effect is strong for both crops with shipping costs also affecting soybean basis and own inventory levels positively correlated with corn basis the effect of the wedge between the price of carrying physical grain and the maximum storage rate on basis is positive for both crops the empirical results which are robust to multiple estimators provide stronger evidence of a structural break for the soybean basis than for the corn basis

income convergence within an economic union the role of factor mobility and coordination abstract in the context of a human capital based growth model we show the essential role of labor mobility in equalizing income levels for countries that start off from different initial income positions human capital externalities cum labor mobility are the driving forces behind the income level equalization process in a non cooperative equilibrium labor mobility will be limited and income level equality will not be achieved coordination will allow free mobility of labor within an economic union leading to income convergence coordination of educational policies will also help internalize the inter regional human capital externalities to ensure efficient growth for members of the union

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

political preference functions and public policy reform a model of policy making is developed where governments seek to maximize support from social groups through the combination of both pert social welfare increasing and pert welfare transferring policies the implicit weights of a political preference function shift with a change in the relative cost of interest group organizing attention is paid to the degree of wealth transfers as total social welfare increases because of pert policy changes the model demonstrates that in the case of two competing groups the weight given to one group in the allocation of social surplus will increase as total social welfare increases with a bias toward the other group the relative weights placed on consumers and producers based on pest policies alone are misleading indicators of the political influence of groups a number of general implications of this political economic analysis for the reform of public policies are investigated

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

economic theory and farm politics what can economics offer in the explanation of politics the first accomplishment is to reduce the subject to a maximization problem analogous to others encountered in economic theory a second accomplishment is to make this problem interesting to make it really illuminating about politics both steps are difficult and the accomplishments have been only partial viewing politics as maximization may seem unreasonably austere and narrow but it is what distinguishes the contribution of economics from that of political scientists or more general social observers empirical work by economists on farm politics typically brings in these broader concerns but this paper attempts instead to justify the narrower approach and to explore its implications its organization is first to spell out details of the contribution of economic theory to explaining politics second to review work on agricultural policies in relation to this theory and finally to discuss implications for positive versus normative economics in policy analysis

applied general equilibrium welfare analysis harberger has long advocated a particular technique for measuring the sum of all effects of an intervention both in the intervened in and related markets the technique is to calculate consumer and producer surplus changes behind demand and supply curves that are explicitly general equilibrium ge that is along curves that hold constant demand and supply conditions in related markets but not prices by calculating surplus changes with respect to such curves one simulates the equilibrium price paths in other markets resulting from the intervention and captures the sum of the welfare effects several authors have elaborated on harber

economists and public policy chicago political economy versus conventional views both conventional welfare economics and public choice analysis suggest that economists have an important educational role to play in the public policy process in improving the decision making process in sharp contrast information and incentive problems related to voting rules the bureaucracy and the legislature do not arise in cpe because these processes are all perfect agents of interest groups consequently the political process is efficient and there is no scope for beneficial economic analysis as it relates to the sugar program or other public policies that is the polity is efficient or it would be reordered by competing interest groups to make it so but as mitchell 1989 290 stresses the important unanswered question in cpe remains if there is no scope for improvement how and why does change occur

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

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

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

trade protection and the role of campaign contributions in u s food and tobacco industries to exert political pressure an organization must be capable of obtaining contributions from its members for lobbying activities for this reason past studies analyzing the determinants of political outcomes such as tariffs such as caves 1976 lavergne 1983 saunders 1980 salamon and siegfried 1977 ray 1981a 1981b have used an industry s structural characteristics such as the number of firms and the sales concentration ratio to account for political activity more recently baldwin 1989 among other economists has advocated the study of more direct indicators of lobbying such as political funding levels and the number of employees supported by private interests the importance of lobbying activity in determining the levels of trade protection depends upon the responsiveness of government to such activity bhagwati 1989 distinguishes two types of government behavior passive behavior and self willed behavior under the first type policymakers maximize political support and will be more likely to respond to lobbying activity 1 however if behavior is driven by self willed principles then policymakers will make choices that reflect the needs of their constituents and will be less susceptible to special interest group pressures viewed from the perspective of an industry that is willing to spend resources in order to influence political outcomes contributions to political candidates can have a facilitative and or a persuasive role 2 under a facilitative role campaign contributions are merely a transaction cost for granting access and enabling the industry to inform politicians about the industry s needs in this case the industry structural characteristics are what lend political weight under a persuasive role campaign contributions are independently effective in influencing political outcomes regardless of the industry s structural attributes combining the latter role with the passive government behavior discussed above gives rise to models of exchange and political investment as in the work of peltzman 1976 concern over identifying the determinants of trade barriers and the role of campaign contributions in particular follow from three considerations the first consideration is efficiency if institutional arrangements encourage lobbying as a means of influencing policy choices then a significant waste of resources may occur through competition in the political arena 3 lobbying therefore may result in a decline of overall economic efficiency the second consideration is the dominance of special interests over social concerns the arguments for protection often include protection of jobs and unfair competition which may differ from the factors that drive the policy decisions such as the strength of special interest lobbying the third consideration is redistributional justice a significant redistribution of wealth may occur as trade barriers increase prices and domestic industry profits at the expense of domestic consumers the objectives of this article are twofold the first objective is to explain the variation of the level of trade barriers tariffs and import quota tariff equivalents these will be explained in terms of industry structure characteristics number of firms seller concentration and geographic dispersion comparative disadvantage and lobbying activities using data from the u s food and tobacco manufacturing industries for the empirical analysis the second objective is to ascertain the role and importance of lobbying activities in determining the levels of trade barriers a novel feature of this article is that it incorporates more direct measures of lobbying activity such as the contributions of political action committees pacs associated with the industries affected by the trade barriers it also emphasizes the need to consider contributions and protection together in order to capture the exchange between political investments and income transfers as shown in snyder 1990

fiscal flows in the united states and canada lessons for monetary union in europe regional flows of federal taxes and transfers within the united states and canada are used to analyze long term fiscal flows the redistributive element and short term responses to regional business cycles the stabilization element in the united states long run flows amount to 22 cents in the dollar while the stabilization effect is 31 cents in the dollar in canada the redistributive effect is larger 39 cents and the stabilization effect smaller 17 cents federal flows appears to depend on the institutional structure of the country concerned however in both countries the redistributive element is considerably larger than the amounts involved in the ec structural funds program as for stabilization national fiscal policies in the ec appear to have been as effective as federal governments in the united states and canada in cushioning shocks to incomes

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

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

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

in search of rational government what political preference function studies measure and assume political preference function ppf studies assume that policy making can be described by a mathematical problem in which a rational government maximizes a function of interest groups welfares the purpose of my paper is to explain in depth ramifications of ppf study assumptions and methodology ppf studies that attempt to measure interest group political power do so by measuring marginal rates of transformation along a pareto frontier one can estimate political power with a ppf only if observed policies are pareto efficient which may depend on the assumed number of interest groups and policy instruments marginal rates of transformation need not reveal anything meaningful about interest group political power and may incorrectly measure the direction of transfers

political criterion functions and the analysis of wealth transfers agricultural economics devotes much attention to analyzing market interventions and their distributional implications recent research emphasis has shifted from the analysis of policy effects toward explaining the underlying causes of farm policy gardner 1983 one popular research tool in analyzing the latter issue is the metaphor of aggregate rationality policies are the outcome of a single optimization problem that balances the welfare of conflicting pressure groups the criterion function that rationalizes policies is often called a political preference function e g rausser and freebairn in the present paper we investigate two assumptions underlying agricultural economic models of the political economy of wealth transfers that the political process is indeed characterized by aggregate rationality as questioned by bates 1989 and that governments objectives are limited to fiscal concerns and political rewards from pressure groups many studies posit that individual rationality in rent seeking leads to a form of aggregate rationality in policy outcome gardner 1983 rausser and freebairn other studies describe policy formation as a bargaining game leading to the maximization by a single policy maker of a criterion function of groups welfare measures zusman rent seeking activities by interest groups determine the weights given individual surplus measures in the criterion function roe and graham tomasi rausser and de gorter a surplus possibility or transformation set constrains this maximization of a weighted sum of surpluses one infers the relative weights on group s welfare from the marginal rates of transformation of one surplus measure into another why might this model of aggregate rationality make sense the political process often leads to enforceable contracts e g the u s farm bill which are outcomes of a recurring and predictable process e g five year farm bill cycle enforcement mechanisms and the repeated nature of the political economic process make plausible the use of cooperative game theoretic arguments i e the assumption of a pareto efficient political equilibrium shubik studies typically treat the government as a monolithic actor fafchamps sadoulet and de janvry lopez oehmke and yao and some studies additionally posit cooperation of all players in the political economic game love rausser and burton the aggregation of individual rational behaviors of rent seekers and government agencies may not lead to a cooperative game equilibrium bates 1990 north 1991 the folk theorem admits many solutions to a bargaining game and does not necessarily lead to pareto optimality fudenberg and maskin by contrast the original rent seeking literature as opposed to the cooperative efficient view of government choice posits government inefficiency as a cornerstone tullock the existence of deadweight losses associated with transfers is prima facie evidence of inefficiency in addition enforcement mechanisms are often incomplete and costly north 1990 and governments may have a vested interest in incompletely enforced property rights which exacerbate rent seeking and inefficient outcomes this problem of aggregate rationality we term the integrability problem of policy choice that is can one recover a well behaved criterion function from a set of equations describing observed policy outcomes the second assumption regarding government behavior has a strong and weak form the strong assumption excludes government as a fullfledged player in the political economic game algebraically speaking the government s objohn beghin and william foster are assistant professors department of agricultural and resource economics north carolina state university the authors thank d s bullock for his comments d burton l karp a love and g rausser for helpful discussions

the microeconomics of the developmental paradox on the political economy of food price policy abstract a longstanding puzzle in comparative economics is the developmental paradox the tendency for government support for agriculture to increase with national income and to decrease with the proportion of economic activity and of the population in agriculture this paper offers a microeconomic explanation for that puzzle it establishes analytically the microeconomic basis for coalition alignments with respect to food price policy then numerically simulates the comparative static effects of alternative food policies on coalition structure a parsimonious household model applied to a heterogeneously endowed society demonstrates how variation in individual welfare effects might beget distinct coalitions in the debate over food price policy and how those policies are inextricably linked to land population and technology policies in food agriculture moreover coalition alignments on particular policy debates are path dependent in particular food price policy creates its own political support

least cost cheap food policies some implications of international food aid abstract many low income countries pursue cheap food policies in which consumers pay subsidized prices for bread rice and other staples this paper addresses the issue of why different governments select different food subsidy policies using multiple instruments rather than a simple across the board subsidy to provide consumers with access to cheap food it examines the optimal structure of cheap food policies in the context of a partial equilibrium model in which the country may be large in trade and is able to combine import subsidies or tariffs and output taxes or subsidies to transfer income to consumers through the market the model allows for a marginal opportunity cost of government revenues greater than one dollar in addition in the model food aid from overseas may be either given away to the consumer or given to the government for subsequent sale in the domestic market the results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers in addition an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity

efficient redistribution using quotas and subsidies in the presence of misrepresentation and cheating this paper introduces misrepresentation and cheating into the policy analysis of output quotas and subsidies analytical results show that when cheating occurs output quotas are a less efficient means of income redistribution than is traditionally believed as well cheating increases the transfer efficiency of output subsidies the result is that an all or nothing choice between quotas and subsidies will generally favor the use of subsidies a combination of quotas and subsidies however usually remains the most efficient means of income redistribution through market intervention a key assumption in agricultural policy analysis is that farmers follow the provisions of the policy instruments in the manner desired by the policy maker or alternatively that it is costless to ensure that farmers do so in reality however farmers may be expected to act opportunistically when faced with an agricultural policy when a production quota is in effect farmers may cheat by overproducing and selling the above quota amount through alternative channels under an output subsidy scheme farmers may report and collect on a greater quantity of production than they actually produced the possibility of misrepresentation and cheating arises because it is costly to determine farmers actions because of this cost farmers are in a position to misrepresent their quantity of production and or to cheat very few studies have incorporated misrepresentation or cheating in theoretical agricultural policy analysis one exception is alston and smith who raise the question of cheating and black market activity in an examination of rationing in an industry with an effective minimum price policy in place studies that deal with farmer opportunism can also konstantinos giannakas is an assistant professor in the department of agricultural economics university of nebraska lincoln murray fulton is director centre for the study of co

the peculiar rationality of beef import quotas in japan in recent years economists have devoted considerable effort towards explaining why governments protect certain domestic industries from import competition anderson and baldwin so far however little attention has been directed at explaining the choice of protective policy instrument why for example are import quotas rather than less distortionary production subsidies or tariffs used an especially interesting case is provided by east asian beef protection policies import quotas in japan and south korea have ensured that beef prices in these countries are several times higher than import prices saxon and anderson anderson a major reason for protecting the beef sector is to boost domestic livestock producers incomes the first best policy instrument for achieving this objective namely income supplements is said to be politically impracticable because of its budgetary cost there is however a second best policy which may harm domestic consumers less than the present policy without reducing returns to beef producers or drawing on general tax revenue this policy involves replacing import quotas with a less restrictive tariff and or levy on imports and using the tariff levy revenue to subsidize the domestic producer price up to its present quota protected level such a change in beef import policy has been advocated for japan by a number of authors in recent years forum for policy innovation hayami longworth 1976 1978 hayami s analysis suggests that all parties would benefit from a partial trade liberalization of this sort if such a policy change is so beneficial why does japan continue with restrictive import quotas and why are other countries such as south korea following the japanese example in fact the recommended policy is to some extent already in place japan s beef imports are subject to a 25 tariff in addition the government monopoly importing agency imposes a levy on imports which is used in part to support feeder calf prices the question then becomes to what extent is further liberalization possible without reducing beef producer protection or drawing on treasury funds the theory section below shows that the answer depends on whether none some or all existing government programs being financed by rents from imports are assumed to continue the second section looks empirically at the likely extent to which consumer beef prices in japan could fall in each of these cases and at the effects of such reductions as compared with both the present situation and free trade in the light of these results the third section suggests a number of reasons for the persistence of quotas

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

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

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

judging agricultural policies a survey this survey provides a structured picture of 40 years of literature which uses welfare economic tools to judge agricultural policy challenges and developments of normative agricultural policy analysis are discussed in an easily accessible graphical framework it is shown how the literature has gone from examining a very small discrete set of simple policies to a much broader often continuous set of policies that combine policy instruments simultaneously the importance of the pareto criterion used to explore the limits of how government can affect welfare is revealed moreover given the importance of the objective of income redistribution in agricultural policy agricultural economists have often departed from the purely efficiency oriented tradition in economics it is shown that they have tried to incorporate equity considerations by either adding these criteria as constraints to the social welfare function or directly incorporating these criteria in the functional form of the social welfare function

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

price support acreage controls and efficient redistribution this study is concerned with the combination of target price and acreage controls as the two major mechanisms of farm policy acreage controls are shown to enhance the efficiency of redistribution under a target price program more specifically this study demonstrates that if the traditional cobb douglas production function is assumed acreage controls do not enhance the efficiency of target price programs in the process of redistributing income to the farm sector the study proves that if the elasticity of substitution between land and all other inputs is less than one then the income redistributional costs are likely to be reduced moreover by using an empirical estimate of the elasticity of substitution and farm data for the time period 1984 88 this study demonstrates that acreage control programs have drastically reduced the deadweight losses associated with income redistribution flowing from target price programs these results lend strong support to the public choice notion that politicians favo

one money for europe lessons from the us currency union currency union barry eichengreen the creation of a monetary union in europe is often justified by the desire to reap the full benefits of economic integration the complete removal of capital controls raises a large number of issues the case for free capital mobility is strong but not overwhelming it hinges on issues of technology transport costs market structure and labour mobility and in the end is an empirical matter for which us experience may provide useful information policy making institutions differ in important respects however the us tradition of fiscal federalism for example has no ec wide counterpart yet its functions seem a desirable feature of a monetary union in particular it is shown to play an important role in absorbing regional disturbances mostly via the tax system us experience also suggests that a currency union creates pressure for fiscal policy harmonization affecting both taxes and spending although a currency union fundamentally alters the balance of payments adjustment process the potential problem of depressed regions remains a serious one given the increased tightness of the external constraint the limited extent of labour mobility and other features of european labour markets solutions based on us experience include extensive swap facilities and a european version of fiscal federalism

policy dependency and reform economic gains versus political pains economic analysis condemns market intervention in favour of farmers as inefficient and ineffective and therefore worthy of radical reform practical experience however indicates that such lessons are hard to learn and implement economic analysis tends to ignore the path dependencies generated by the policy evolution process without reform strategies that take full account of these dependencies policy reform will continue to be reluctant slow and frequently counterproductive this paper reconsiders the evolution of farm policies and the economic assessment of their costs and benefits in so doing it re phrases conventional economic arguments in terms which seem to accord better with sensible intuition which may prove more accessible and credible to policymakers and advisors the difficulties of reconciling economic efficiency with political acceptability are identified the paper concludes with a substantial challenge to the agricultural economics profession

public policy and constitutional prescription in public policy analysis much confusion exists about the roles of explanation and prescription to offer a new perspective a paradigm is developed that gives both theoretical and empirical meaning to the constitutional determination of political preference functions or public sector governance structures current policies are viewed as a rational outcome of a political economic process three relevant spaces are specified result policy instrument and constitutional for the policy instrument space the paradigm provides a framework for generating testable propositions on government behavior while for the constitutional space the framework is prescriptive the collective choice rules of the constitutional space structure the tradeoff between public and special interests

a critical assessment of the political preference function approach in agricultural economics the political preference function ppf approach has been used often in the agricultural economics literature in attempts to explain the causes of farm policy the fundamental assumption of ppf studies is that government selects levels of policy instruments such that it maximizes a function of interest groups welfare measures for the purpose of acquiring maximum political support ppf studies often use the familiar neoclassical constrained maximization problem to measure relative political powers of interest groups involved in policy determination some weaknesses of the ppf approach have been discussed in the literature gardner 1989 alston and carter 1991 and von cramontaubadel vct 1992 while each of these critiques provides valuable insight into ppf methodology and its limitations none of them clearly explains the simple fundamental structure of the ppf framework this neglect of certain fundamentals has led to confusion in the litera

structure of agricultural protection in industrial countries abstract the nominal rates of agricultural protection in ten industrial countries from 1955 to 1980 are estimated with the same commodity coverage and data definitions a regression analysis is conducted to explain variations in the measured level of agricultural protection in terms of political as well as economic factors nearly 80 percent of the variations is accounted for by differences in agriculture s comparative advantage agriculture s share in total economy the international terms of trade between agricultural and manufactured commodities regionalism eec and food security consideration associated with non military alliance

optimal storage and marketing over space and time borrowing from the theory of optimal resource extraction we develop the mechanism guiding efficient commodity storage and marketing over producing regions through the crop year optimal storage occurs at producing areas and time in storage varies directly with distance to market prices grow with interest rates in locations where storage is efficient but more slowly elsewhere which explains why market prices i e prices at the market grow more slowly than interest rates the model is empirically supported by examining storage in the corn belt rates of price growth at various points and quarterly grain marketings

welfare implications of equilibrium supply and demand curves in an open economy line integral theory is used to prove that in a closed economy the net domestic social welfare effects of a market distortion can be captured in the distorted market alone by using equilibrium supply and demand curves considerable confusion exists in the applied literature about the proper application of this proposition it is shown that the proposition does not generally hold for open economies it is shown that in general neither geometric areas behind equilibrium supply curves nor geometric areas behind equilibrium demand curves have any welfare significance

determinants of commodity prices a panel of annual information between 1960 and 2006 for approximately 50 different commodity prices and some other variables and sources is used to tests the determinants of commodity prices according to the evidence interest rates seem to maintain a negative relationship with commodity prices

a pecking order of capital inflows and international tax principles abstract even though financial markets today show a high degree of integration the world capital market is still far from the textbook story of high capital mobility the purpose of this paper is to highlight key sources of market failure in the context of international capital flows and to provide guidelines for efficient tax structure in the presence of capital market imperfections the analysis distinguishes three types of international capital flows foreign portfolio debt investment foreign portfolio equity investment and foreign direct investment the paper emphasizes the efficiency of a non uniform tax treatment of the various vehicles of international capital flows

explaining price policy bias in agriculture the calculus of support maximizing politicians a model is developed to explain observed patterns of policy intervention in agriculture we analyze the interaction between political support seeking politicians and supportsupplying citizens society consists of a rural and urban group we determine the effects on transfers of relative group size disparities in income endowments between groups and the deadweight loss of redistribution the framework advanced is an alternative to that of the interest group model and is used to explain for example why the export sectors in developing countries are taxed more and why the united kingdom is less adamant for higher price supports than germany

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

processing industry capacity and the welfare effects of sugar policies normally analysis of policies affecting commodities such as sugar employs long run comparative statics under certainty and ignores processing industries like cane sugar refining under the implicit assumption that the capital is malleable in both the short and long run we present a dynamic model calibrated to world sugar and solved with numerical dynamic programming that includes the specific capital of the refining industry when compared to an otherwise identical static model the dynamic model suggests that some 20 of welfare losses may be misattributed to cane sugar producers instead of refiners in contrast the difference between certainty and uncertainty proves to be unimportant

taxing incumbent monopoly to foster entry abstract this paper investigates whether it is welfare enhancing to tax the output of a monopoly in order to foster cost inefficient entry this question is of particular concern in the energy markets dominated by cartel like affiliations opec and oil russia s gas exports to europe and the interest and practice to stimulate the development of alternative fuels making the realistic assumption that none of the players can commit to future policies subsidies are not a viable strategy for the government a tax cannot be first best but can be second best if the government cannot force the incumbent monopoly to sell its output at no profit and if the incumbent s profit is discounted however stimulating supply by improving the conditions for entry is not the prime concern of taxation after all it lowers aggregate supplies and may even lower the entrant s supply but to accrue parts of the monopoly rent

strategic agricultural trade policy interdependence and the exchange rate a game theoretic analysis strategic agricultural trade policy interdependence is modeled using a game theoretic framework the model distinguishes between the european community the united states and a politically passive rest of the world particular emphasis is placed on the effect of the exchange rate on the equilibrium outcome of this game without compensatory payments to those with the highest political influence the results suggest that only modest reform is possible with compensation liberalization occurs but free trade is not obtained simulations also indicate that the u s gains incentive to reduce protection given a depreciation of the dollar while incentive to liberalize trade policies decreases as the dollar appreciates

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

international capital markets and interest groups capital market integration has increased the scale and mobility of capital movements within and among nations to unprecedented levels integration is fairly recent frankel concludes from his review of the literature that barriers in the major world financial markets were sufficiently low that by 1989 financial markets could be viewed as being fully integrated the scale and mobility of capital flows among nations has numerous implications to currency values interest rates wealth and through current capital account linkages to relative product and factor prices capital flows that have real economic effects also affect the functioning of policy instruments and how effective they are in remunerating an interest group at the expense if any of others this paper provides insights into the process and linkages by which the integration of capital markets has altered economic policy through interest group pressures on government if economic policy is viewed as the outcome of interest groups seeking through the power of the state that which cannot be provided by the market alone then capital market adjustments that affect the return to policy instruments can also affect the returns to lobbying resources and hence the balance of political influence among the various groups 2 this type of explanation for economic policy has been forwarded under the rubric of models of rent seeking krueger 1974 3 the paper is organized as follows 4 selected historical evidence linking capital markets to pressures for legislation in the united states and other countries is briefly reviewed in some cases capital market adjustments have eased pressures for protection while in other cases adjustments either forced policy change because of a liquidity constraint or made unprofitable the lobbying for sustaining policy in face of these adjustments the discussion in the next section provides deeper insight into capital market lobbying linkages discussion focuses on the results from a simple model of rent seeking where government intervenes in markets and provides sector specific public goods

international tax competition and gains from tax harmonization abstract in a world economy there are two types of distortions which can be caused by capital income taxation in addition to the standard closed economy wedge between the consumer saver marginal intertemporal rate of substitution and the producer investor marginal productivity of capital i international differences in intertemporal marginal rates of substitution implying an inefficient allocation of world savings across countries and ii international differences in the marginal productivity of capital implying an inefficient allocation of world investment across countries the paper focuses on the structure of taxation for countries which are engaged in tax competition and on potential gains from a tax harmonization we show that if the competing countries are sufficiently coordinated with the rest of the world then tax competition leads each country to apply the residence principle of taxation and there are no gains from tax harmonization if however there is not sufficient coordination then tax competition leads to low capital income taxes and the tax burden falls on the internationally immobile factors the outcome is nevertheless still efficient relative to the available constrained set of tax instruments

impacts of trade liberalizations under the uruguay round on the world sugar market the impacts of the uruguay round policy provisions on the world sugar market show that these policies will stabilize the world sugar price at slightly higher levels than in the baseline global sugar consumption will increase as a result of the income growth caused by the uruguay round economic resources will be allocated more efficiently among the sugar industries of the various countries however the impacts on the sugar industries in countries with strong producer supports will be rather small because the negotiation process of the uruguay round has accommodated the changes in sugar policies already implemented by individual countries in the past few years low cost sugar producing countries will benefit from the higher world sugar price and consumers in countries with protected markets will benefit from lower domestic prices

rent seeking and the welfare cost of trade barriers this paper estimates the potential social cost of trade barriers using the harberger and the tullock posner approaches for a sample of u s food and tobacco manufacturing industries in addition it tests the relationship between the computed welfare losses and special interest political activity pac contributions if all rents were dissipated through rent seeking the social cost of trade barriers would be about 12 5 percent of domestic consumption and would be particularly large for sugar and milk products where quotas are the main instrument of protection furthermore the results indicate that welfare losses are positively associated with industry lobbying but the strength of such association is strongly dependent on industry concentration

a positive theory of agricultural protection the present paper analyses the political economy of agricultural protection in a general equilibrium framework rational politicians offer protectionist policies in return for political support from their constituency individuals in the economy have different factor endowments politicians exploit these differences in establishing redistributive policies when maximizing political support changes in economic variables such as the urban rural income gap capital intensity the share of agriculture in total output and total employment and the share of food in consumer expenditures affect the political equilibrium policy the analysis concludes that the observed correlation between economic development and agricultural protection is caused by a multiplicity of factors

dynamic games and international trade an application to the world corn market dynamic games are a conceptually useful way of analyzing imperfect markets where both buyers and sellers have potential market power previous analysis of imperfect markets was static and limited to either exporters or importers a dynamic game allows the inclusion of both importers and exporters in a multiperiod framework allowing the derivation of reaction functions a nash noncooperative difference game is applied to the international corn market to explore the plausibility of numerical results the results are reasonable and show that the game approach based on a more comprehensive econometric model has a promising future in policy analysis

convergence clubs among brazilian municipalities abstract in this paper we test the convergence hypothesis across brazilian municipalities in brazil from 1970 to 1996 using quahs scand j econ 95 4 1993 427 j econ growth 2 1997 27 methodology which is based on the dynamics of cross section distributions of economies incomes our empirical investigation suggests that there is no convergence across brazilian municipalities or in other words that there is formation of convergence clubs

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

price and quantity controlled agricultural markets and disequilibrium econometrics a survey abstract this survey reviews the literature on estimating single markets in disequilibrium in the presence of regulated price and or quantity controls e g minimum price regimes and or marketing quotas most of the literature is found to describe pure econometric technique with only a few applications having emerged to date various reasons for the broad non acceptance of this literature are offered including a perceived lack of realism proposals to close this econometric theory application gap are put forward including the use of effective demand concepts in specifying demand and supply functions synthesizing some closely related literature on agricultural price quantity controls with disequilibrium econometrics i e endogenous government policy and the effects controls have on yield uncertainty and price risk and outlining more applicable econometric technique extensions

public policies pressure groups and dead weight costs abstract this paper presents a model of competition among special interest groups for political influence each active group exerts pressure to affect its taxes and subsidies where activities of different groups are related by the equality between total tax collections and total tax subsidies the dead weight costs and benefits of taxes and subsidies play a major role in our model an increase in the dead weight cost of taxation encourages pressure by taxpayers while an increase in the dead weight costs of subsidies discourages pressure by recipients various applications of the analysis are discussed