distributive leakages of agricultural support some empirical evidence abstract the paper evaluates the transfer efficiency of the austrian bread grain policy taking into account distributive leakages i e how much of the transfers officially intended to support farm income are finally realised in the upstream and downstream industries gardner s am j agric econ 65 1983 225 well known measure of average transfer efficiency ate is augmented for the case of more than two social groups and computer intensive simulation procedures are utilised to deal with parameter uncertainty

sectoral implications of farm program modifications the overall and distributional effects of farm programs and selected revisions are examined using a mathematical programming sector model the model incorporates market distortions caused by price supports target prices program participation deficiency payments and marketing loans current farm programs are found to increase producer prices depress consumer prices and in turn result in excess production and higher consumption and exports domestic and foreign consumers as well as domestic producers are subsidized by farm programs social deadweight loss occurs as government payments exceed welfare benefits received by consumers and producers society as a whole benefits from reductions in program provisions

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

is the united states really underinvesting in agricultural research that the level of public investment in u s agricultural research is too low is widely accepted this paper argues that there are two important limitations to the evidence assembled in support of the underinvestment hypothesis a many authors have compared the social rate of return to public investments with the private rate of return to private investments b costs of public expenditures on agricultural research have been underestimated by a failure to account for the marginal excess burden of the tax collection system taking these two factors into account evidence in support of the underinvestment hypothesis is weakened considerably

when do export subsidies have a redistributional role if an export subsidy is efficient that is has a surplus transfer role then there exists an implicit function relating the optimal level of the subsidy to the income target in the agricultural sector if an export subsidy is inefficient no such function exists we show that dependence exists in large export equilibrium not in small export equilibrium and show that these results remain robust to concerns about domestic tax distortions the failure of previous work to produce this result stems from its neglect of the income constraint on producer surplus in the programming problem transferring s cons umersand taxpayersto farmers

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

the effects of farm commodity and retail food policies on obesity and economic welfare in the united states many commentators claim that farm subsidies have contributed significantly to the obesity epidemic by making fattening foods relatively cheap and abundant and symmetrically that taxing unhealthy commodities or subsidizing healthy commodities would contribute to reducing obesity rates in this article we use an equilibrium displacement model to estimate and compare the economic welfare effects from a range of hypothetical farm commodity and retail food policies as alternative mechanisms for encouraging consumption of healthy food or discouraging consumption of unhealthy food or both we find that compared with retail taxes on fat sugar or all food or subsidies on fruits and vegetables at the farm or retail levels a tax on calories would be the most efficient obesity policy a tax on calories would have the lowest deadweight loss per pound of fat reduction in average adult weight and would yield a net social gain once the impact on public health care expenditures is considered

what can we learn from a large border effect in developing countries abstract failure of the law of one price lop in the short run is an empirical regularity recent research using disaggregated price data for different cities across an international boundary has shown that the variation of the prices in equidistant cities located in two different countries is systematically larger than that for the cities within the same country nontariff barriers and exchange rate variability are cited as the proximate causes of this systematic difference in consumer price variability results using data from developing countries with large nontariff barriers and more volatile exchange rate suggest that those claims are overemphasized

on the design of agricultural policy mechanisms the fact that different agricultural policy mechanisms have emerged for different commodities suggests that the choice of policy instrument may reflect the goals of agricultural policy makers this paper uses the principles of mechanism design under asymmetric information to examine the motivations underlying the choice of agricultural policy mechanisms it is found that supply control mechanisms favor high cost producers and the budget while mechanisms resulting in overproduction favor low cost producers

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

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

cross subsidization due to inframarginal support in agriculture a general theory and empirical evidence a general theory of cross subsidization due to inframarginal support is developed two sources of output distortion are identified exit deterrence and extramarginal output some firms would not be in business without the subsidy cost savings due to declining average costs are always greater than the losses incurred where price equals marginal cost moreover it is theoretically possible for inframarginal subsidies to expand output more than equivalent fully coupled subsidies empirical analysis of u s dairy subsidies isolates these components of cross subsidization and finds distortions from inframarginal support to be substantial with implications for trade negotiations dispute settlement and policy formulation copyright 2008 oxford university press

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

business cycles through international shocks a structural investigation abstract this paper investigates the sources of output volatility by decomposing the international shocks into finance and trade shocks through structural bayesian estimations of an open economy dsge model on 16 countries on average international shocks explain around 70 of output fluctuations

livestock disease indemnity design when moral hazard is followed by adverse selection averting or limiting the outbreak of infectious disease in domestic livestock herds is an economic and potential human health issue that involves the government and individual livestock producers producers have private information about preventive biosecurity measures they adopt on their farms prior to outbreak ex ante moral hazard and following outbreak they possess private information about whether or not their herd is infected ex post adverse selection we investigate how indemnity payments can be designed to provide incentives to producers to invest in biosecurity and report infection to the government in the presence of asymmetric information we compare the relative magnitude of the first and second best levels of biosecurity investment and indemnity payments to demonstrate the tradeoff between risk sharing and efficiency and we discuss the implications for status quo u s policy

food costs and the 1988 us drought abstract alternative government stock policies are evaluated in terms of their effects on the us livestock sector and consumer food prices before and after the 1988 drought using a comprehensive model of the us agricultural sector stock levels associated with the food security act of 1985 fsa85 are compared with those of a reduced stock policy this option reduced government corn stocks to zero and lowered overall stocks by almost 2 million bushels prior to the drought saving taxpayers about 15 billion compared to the observed level of spending associated with fsa85 however consumers were projected to spend almost 40 billion more following the drought in higher food particularly meat costs because of the dramatic shock lower corn stocks would have on corn prices and the livestock sector

budgetary and producer welfare effects of revenue insurance legislation passed in 1996 changed the way the u s federal government acts to reduce risks faced by u s crop products the authors compare the new alternative forms of revenue insurance to the 1990 deficiency payment program and to a no program alternative they estimate the effects of the alternative polices on the acreage allocations of a representative farm on the expected government cost and on producer welfare simulation results indicate that a revenue insurance scheme that guarantees 75 percent of expected revenue to risk averse produced could provide approximately the same level of benefits as the 1990 program at as little as one fourth the cost

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

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 goals of u s agricultural policy a mechanism design approach this article examines motivations underlying the government s choice of alternative policy mechanisms for subsidizing agriculture optimal policies are analyzed for three government objectives one where the government wishes to ensure a minimum level of net income for all farmers a second where the government s only concern is to transfer income from consumers and taxpayers to the farm sector and a final augmented income transfer objective the analysis offers an explanation for agricultural policy mechanisms that involve overproduction by high cost producers relative to a free market equilibrium such a distortion might arise from the existence of nonmarket values for the production of relatively high cost farmers in the government s objective

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

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

sequestration offsets versus direct emission reductions consideration of environmental co effects abstract atmospheric greenhouse gas accumulation and consequential temperature increase can be remedied by emission reductions or agricultural carbon sequestration both options have direct and external environmental effects this paper examines the magnitudes of existing estimates of corresponding external co effects and how they could affect optimal combination of emission reductions and agricultural carbon sequestration we discuss whether government intervention in the form of taxation subsidization is justified for internalizing the externalities considering their relative magnitudes implementation costs and potential benefits that could be derived from such intervention we conclude that the existing estimates of external benefits from sequestration and emission reduction do not provide enough support for allocating resources to alter the market mix of carbon sequestration and direct emission reduction strategies

rationalizing agricultural export subsidies export subsidies are an important form of agricultural policy especially for large traders such as the united states and the european community a number of small countries also use export subsidies in effect e g saudi arabian wheat or canadian dairy products in that the domestic price is set well above world levels and surplus production is dumped onto the world market a number of recent contributions to trade theory have argued that export subsidies can be welfare enhancing for the subsidizing country and by implication that the policy choice is consistent with the hypothesis that a benevolent government is pursuing pareto efficiency in the present paper we examine these arguments and present an alternative explanation of export subsidies utilizing the concept of efficient redistribution becker gardner 1983 in standard trade models arguments in favor of global export subsidies arise from failure to exploit market power in another good itoh and kiyono feenstra itoh and kiyono use a threegood model to show that subsidies on marginal goods defined as goods not exported at all or exported in small quantities can increase welfare in the subsidizing country a subsidy on marginal goods causes their production to increase and the supply of nonmarginal goods to decrease thereby raising the price of the nonmarginal goods and increasing the exporter s terms of trade feenstra also employs a threegood model and demonstrates that it is possible for the pattern of substitutability and complementarity across goods to allow subsidies to increase welfare the necessary condition is that the subsidized export be a stronger substitute for another exported good or a stronger complement for an imported good in the subsidizing country than abroad the export subsidy increases welfare by improving the terms of trade in the other imported or exported good the distortion in feenstra s model is the failure to exploit market power in the second or third market as an alternative to global export subsidies abbott paarlberg and sharples aps have examined targeted export subsidies and found that in some circumstances they can be welfare improving dutton later showed the aps result arises because they first constrain the export tax to the rest of the world to be zero so that it becomes theoretically possible for the best export tax to the targeted country to be negative the aps result hinges on differences in import demand elasticities and the exporting country s use of market power in order to price discrim

targeting green payments under a budget constraint this paper examines the impact of regulatory budget constraints on subsidy rates intended to reduce farm emissions this paper focuses on the impact that subsidy rates developed under a limited budget may be optimally differentiated to target in addition to marginal damages features such as abatement costs income transfer and producers participation in the policy the degree to which subsidy rates optimally target these other features depends on how the subsidy is implemented or on how benchmarks for pollution abatement are defined eight hypothetical farms were subjected to five budget levels under three policy scenarios 1 optimally set benchmarks 2 historical benchmarks and 3 uniform benchmarks setting subsidy rates equal to the imputed marginal benefits of abatement is not necessarily optimal under budget constraints and when the regulatory authority is restricted in setting the subsidy benchmark when the benchmark is restricted optimal subsidy rates target marginal costs and income transfer to producers in addition to marginal benefits the optimal subsidy rates in the context of a uniform benchmark were essentially uncorrelated with benefits given a budget large enough to optimally fund a large diverse group of producers

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

reversal of fortune immiserizing technical change in agriculture several recent studies have reported the possibility of immiserizing technical change in agriculture in these studies the interaction of government commodity policy and technical change has been shown potentially to lead to a loss of national welfare a negative rate of return to research the purpose of this paper is to tie these recent results to the earlier results of bhagwati and johnson on immiserizing growth technical change and to offer a more general condition for describing the impacts of distortions on the benefits from technical change

the incidence of agricultural policies abstract a general equilibrium model is used to analyze agricultural policy incidence in the presence of distortionary income taxation the incidence of lump sum transfers to farmers supply control through input retirement and production subsidies are considered partial equilibrium incidence calculations are shown to systematically overstate the benefits farmers receive from farm programs kaldor s compensation test is used to judge the relative efficiency inefficiency of alternative farm programs at the margin supply control through input retirement may dominate decoupled lump sum transfers if the tax system is very inefficient and subsidy payments are high

contract design for the purchase of environmental goods from agriculture an environmental stewardship program whereby farmers are paid directly for the environmental goods they provide is developed by combining the microparameter distribution model with mechanism design principles the program overcomes the information asymmetry between farmers and governments and accounts for the deadweight losses from distortionary taxes the characteristics of optimal input and payment schedules of the program are derived these optimal schedules are determined by the tradeoffs between farming profits environmental benefits and deadweight losses from taxes and are second best except under restrictive conditions on deadweight losses from taxes and on the marginal product of inputs and marginal pollution costs

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