industry characteristics and interest group formation an empirical study the role of interest groups in the political process has been the subject of much analysis in both political science and economics however few studies have examined directly the factors which influence the variation in interest group formation across industrial sectors and between countries using data on 75 industrial sectors in 10 countries we examine the way in which variations in interest group formation are explained by variations in industrial and political characteristics in cross sectional empirical relationships we test for the significance of a variety of industry and political variables our results indicate that industry characteristics such as the proportion of total demand purchased by households and the concentration ratio are related to variations in interest group formation we discuss the implications that our results have for recent theoretical work on the effect of interest groups on economic policy

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

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

the biodiversity supergame this paper considers the ability of developed countries to sustain a cooperative agreement to compensate developing countries for the incremental costs of biodiversity conservation it is shown that depending on certain parameter values and the model specification such an agreement could only codify the non cooperative outcome or achieve the full cooperative outcome where global net benefits are maximized however where the agreement can sustain the full cooperative outcome net benefits will be only slightly larger than in the noncooperative outcome

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

agricultural export subsidies as a tool of trade strategy before and after the federal agricultural improvement and reform act of 1996 if the main justification for agricultural export subsidies is that they reduce government costs of deficiency payments then the 1996 farm legislation would make u s export subsidies largely unnecessary an additional argument advanced in favor of export subsidies is that their aggressive use by one country will cause competing countries to reduce or discontinue their own subsidies this argument is explored by means of a nash equilibrium in which countries choose both a base subsidy level and a response to competitors and by a consistent conjectures equilibrium little support is found for the argument during the period of the mid 1980s to the mid 1990s export subsidies became an increasingly important part of u s farm policy in fact expenditures on the export enhancement program eep exceeded 1 billion in fy 1993 the enduring popularity of export subsidies has been a source of puzzlement to economists see r paarlberg for example economists argue that governments could provide more assistance to farmers at the same cost to consumers if the money spent on export subsidies were spent instead on direct subsidies to farmers anania bohman and carter present a strong argument along these lines several papers have found circumstances under which export subsidies might be justified abbott paarlberg and sharples show that export subsidies can improve welfare in the exporting country if they are implemented in a discriminatory way reducing prices in countries with relatively elastic demands abbott and kallio show how export subsidies may complement other policies intended to support producers when the exporting country has market power in the world market another possible explanation for the popularity of export subsidies is advanced by alston carter and smith 1993 1995 they show that export subsidies may be justified because they reduce the budgetary costs of the price support program there is an additional argument which is frequently heard in debates about agricultural export subsidies but which has not been fully analyzed by economists supporters of the eep program argue that to discontinue its use would be tantamount to unilateral disarmament in the war for international market share in agricultural trade in other words export subsidies are a useful tool of

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

an analysis of bargaining power for milk cooperatives and milk processors in florida the florida dairy market has a few fluid milk processors and many dairy farmers the dairy farmers are represented in negotiation with the processors by a cooperative this research builds a theoretical model of bargaining between the processors and a cooperative the model is applied to the florida dairy market to examine price negotiations between florida milk processors and a dairy cooperative an expectation maximization em algorithm along with maximum likelihood estimation is used to estimate the econometric disequilibrium model with time series data for the period of october 1998 to may 2009 the results show that the class i price set by the federal milk marketing order is the major factor influencing the cooperative s supply reservation price negotiated quantity and production seasonality affect the processors demand reservation price the processors appear to be more patient and have higher average bargaining power 0 8804 than the cooperative 0 1196 the highest lowest bargaining power

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

the political economy of regulations and trade wine trade 1860 1970 dramatic changes in the 1860 1970 wine trade provide insights on the political economy of regulations and policy instrument choice and trade an invasion of phylloxera in the 1870s turned france from the world s leading exporter to a massive importer of wine and grapes when french production recovered a combination of tariffs safety regulations and quality standards were introduced to protect its french producers causing dramatic changes in global wine and grape production and trade including in spain italy turkey greece algeria tunisia and morocco changes in wine regulations were caused by relative income and loss aversion factors in political economy tariffs were the preferred policy instruments as they directly restrict imports bring in revenues have low transaction costs and are preferred political instruments when there are information imperfections safety regulations and quality standards including labelling and input prohibitions reduce asymmetric information for consumers or undesirable externalities and simultaneously protected domestic producers regulations were often targeted at imported products wine and raisins when tariffs were ineffective or constrained by institutions such as on colonial wine hence tariffs and quality regulations were jointly used in wine policy both as complements and as substitutes in policy design

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

agricultural support policies in imperfectly competitive markets why market power matters in policy design most agricultural policy analysis assumes that markets are perfectly competitive despite increasing evidence to the contrary we demonstrate that the interaction of market power and government intervention may lead to outcomes that are counter to key results of policy analysis for perfectly competitive markets we show that market power may reduce or eliminate entirely the net welfare benefits from removing two traditional support mechanisms price floors and deficiency payments and may increase considerably the government s cost of implementing either of them accordingly optimally designed price support measures may improve welfare in the presence of downstream oligopoly and or oligopsony power copyright 2011 oxford university press

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

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

supply management and import concessions countries such as canada which manage domestic supply by regulating both production and imports have come under pressure in recent years to liberalize their trade policy this paper examines the effect of import concessions on the distribution of rents in supply managed industries although import concessions decrease producer welfare it is shown that rather sizeable concessions may occur before producers are worse off under supply management than free trade this is especially true in industries characterized by a low free trade import share and inelastic demand with regard to net social welfare policies that are designed to transfer market rents to producers through supply management incur larger deadweight losses when they also incorporate import concessions gestion de l offre et concessions faites aux importateurs les pays qui comme le canada gerent l offre domestique en reglementant a la fois la production et les importations ont ete soumis au cours des demi eres annees a des pressions pour qu ils liberalisent leurs politiques commerciales ce memoire examine les effets de concessions faites aux importateurs sur la repartition des rentes dans les industries oiu l offre est geree meme si ces concessions reduisent le bien etre des producteurs on montre qu il faut que les concessions soient re lativement importantes pour que les producteurs soient plus mal en point sous un regime d offre geree que sous un regime de libre echange ceci est particulierement vrai dans le cas des industries caracterisees par une demande inelastique et une faible portion du marche allant aux importations en regime de libre echange pour ce qui est du niveau de bien etre social net les politiques dessinees dans le but de transf6rer les rentes aux producteurs via la gestion de l offre engendrent des pertes plus importantes quand on y ajoute aussi des concessions aux importateurs

least cost subsidization alternatives this paper addresses the problem of designing least cost subsidy schemes for agriculture thus it departs somewhat from the mainstream of the literature on agricultural policy analysis which following wallace s pioneering work focuses on evaluating alternative policies in a welfare theoretic context the approach taken here is more closely related to that taken in the optimal taxation literature e g mirrlees it involves the specification of a goal of farm policy and an examination of appropriate policy instruments to achieve that goal the only policy instruments considered are linear subsidies i e subsidies all individuals receive while the criterion for choosing among alternative subsidy schemes is the minimization of government expenditure hence we are interested in isolating the cheapest way of attaining a stated policy objective and we do not consider the welfare consequences of such policy action no use is made of traditional welfare measures like deadweight loss and consumer surplus the approach is purely positive and therefore ignores issues like those raised in gardner s recent paper on efficient redistribution of eco

the economics of coupled farm subsidies under costly and imperfect enforcement this study relaxes the assumption of perfect and costless policy enforcement found in traditional agricultural policy analysis and introduces enforcement costs and cheating into the economic analysis of output subsidies policy design and implementation is modeled in this paper as a sequential game between the regulator who decides on the level of intervention an enforcement agency that determines the level of policy enforcement and the farmer who makes the production and cheating decisions analytical results show that farmer compliance is not the natural outcome of self interest and complete deterrence of cheating is not economically efficient the analysis also shows that enforcement costs and cheating change the welfare effects of output subsidies the efficiency of the policy instrument in redistributing income the level of government intervention that transfers a given surplus to agricultural producers the socially optimal income redistribution and the social welfare from intervention

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

the impact of agricultural subsidies on global welfare increasing global nature of the world economy have sparked much debate as to whether globalization is a vehicle for growth and development or a bane to society the debate is not simply one between the informed and the uneducated some of the most respected economists in the world disagree as to the impacts of globalization stiglitz 2002 refers to the devastating effect that globalization can have on developing countries on the other hand bhagwati 2004 holds that globalization can be beneficial for both developed and developing countries he postulates that for this to occur there must be a set of new policies and institutions that will help developing countries handle increased volatilities result

induced institutional change in the trade and environment debate because of the assumption of constant emission factors economy environment models often show that free trade has negative environmental consequences however this pessimistic view ignores the possibility of trade strengthening the demand for regulatory institutions an institutional optimism hypothesis stating that the net environmental result of trade liberalization is benign is thus formulated in this paper the hypothesis is examined with a cge model that treats institutional change as an endogenous process dependent on income application to nafta using a broad range of scenarios provides some support for the institutional optimism hypothesis the net pollution effect of trade liberalization is in many cases beneficial or low even for the country specializing in polluting industries the implication is that in many cases environmental interests are served better by a focus on institution building in trading partners than on the process of trade liberalization itself

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

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

policies and institutions in transition economies a political economy perspective on the agri food sector abstract this paper argues that since democratic governments are vulnerable to political pressure they should intervene with policies and institutions only when the net economic benefits exceed the costs incurred through increased political access if governments in transition economies are to exercise control it is important that public institutions within and supporting the agri food sector are designed in such a way as to restrain political incentives in practice this means that they should be built so as to take advantage of inherent scale economies

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

on the deadweight cost of production requirements for geographically differentiated agricultural products this article investigates the welfare effects of alternate producer collusion schemes in a context where collusion is authorized in order to cover fixed costs using a linear equilibrium displacement model we find evidence that when the producer group is allowed to control quota levels an input quota policy entails a smaller absolute deadweight loss than an output quota policy this finding suggests that if producer groups are allowed to resort to production distorting instruments to limit output they will make production choices that are less costly for society than if they had been allowed to directly control output levels copyright 2008 oxford university press

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

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

small states in big trouble state reorganization in australia denmark new zealand and sweden in the 1980s in australia denmark new zealand and sweden in the 1980s coalitions of politicians fiscal bureaucrats and capital and labor in sectors exposed to international competition allied to transform the largest single nontradables sector in their society the state particularly the welfare state they exposed state personnel and agencies to market pressures and competition to reduce the cost of welfare and other state services the impetus for change came from rising foreign public and private debt rising public debt levels and expensive welfare states interacted to create a tax wedge between employers wage costs and workers received wages this undercut international competitiveness worsening current account deficits and leading to more foreign debt accumulation two factors explain variation in the degree of reorganization in each country differences in their electoral and constitutional regimes and the willingness of left parties to risk splitting their core constituencies introduction of market pressures is an effort to go beyond the liberalization of the economy common in industrial countries during the 1980s and both to institutionalize limits to welfare spending and to change the nature of statesociety relations away from corporatist forms of interest intermediation in short not just less state but a different state

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

taxes and subsidies for pollution intensive industries as trade policy abstract this paper constructs a model of international oligopoly with negative externalities in production in which optimal environmental policy responses to foreign emission tax and subsidy programs can be calculated it is shown that by granting subsidies for abatement efforts or for a heavily taxed polluting input domestic net welfare is improved by capturing a greater share of the world market since the subsidy programs are supposed to improve the quality of the global environment they can be justified on environmental grounds in addition we show that a pigouvion emission tax restores efficiency in natural resource allocation whereas subsidy programs are in principle used as instruments in imperfectly competitive international markets

rationalizing agricultural export subsidies comment alston carter and smith acs claim an export subsidy can be an efficient mechanism for redistributing income to producers and is always so in a small country unable to influence the world price when raising government revenue causes deadweight losses this claim is surprising in view of the general result in trade theory that domestic distortions are more efficient transfer mechanisms than border distor

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

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

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

internationalization and the social democratic model crisis and future prospects this article examines the crisis of the social democratic model in the four countries austria norway finland and sweden in which social democracy was most successful in maintaining and even extending its two central achievements full employment and the institutional welfare state through the end of the 1980s four major conclusions emerge from the analysis first supply side measures more so than demand management were central to the employment and growth models pursued by social democracy prior to the early 1970s second the increasing trade openness contributed little to the recent problems of social democracy by contrast financial internationalization and deregulation and the multinationalization of capital undermined important features of the supply and demand sides of the models third changes in the international and domestic economies have weakened centralized bargaining fourth governments in the three nordic countries made serious mistakes in economic policy which greatly aggravated

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

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

when do export subsidies have a redistributional role reply our differences are three the first arises from the belief that a nonzero value for the optimally chosen policy instrument implies that the instrument is efficient for redistribution alston smith and vercammen p 543 paragraph 3 consider the two equations 1 o f p3 and 2 f 3 r h a p3 representing the solution to the problem of maximizing weighted marshallian surplus using simultaneously a per unit border intervention 9 and a per unit domestic intervention wr in the solution parameter ot denotes the weight applied to producer surplus parameter p denotes the weight applied to government revenues consumer surplus is implicitly weighted one and the country in question is small in the sense that it is unable to affect world price by any of its domestic adjustments see the appendix details of the forms of the functions f p and h ot p are easily derived but what matters in the context of alston smith and vercammen s comment is redistributivep referencest hatf avorp roducers are consistent with higher values alpha and whereas the optimal domestic intervention 7r has both alpha and beta effects the optimal border intervention r has only a beta effect it does not have a redistributional role garth holloway is reader in agricultural economics and statistics department of agricultural and food economics school of agriculture policy and development university of reading the author is very grateful to xavier irz bhavani shankar chittur srinivasan colin thirtle and richard tiffin for their comments and their wisdom and to mario mazzochi marinos tsigas and cal turvey for their scholarship including help in tracking down a fairly complete collection of the papers that cite alston and hurd they are not responsible for any errors or omissions note in equation 1 that the border intervention is positive whenever a distortion exists because 8 0 implies 3 1 8 1 and thus f p 0 see appendix using alston smith and vercammen s definition the instrument is now efficient and therefore has a redistributive role but now suppose that the distortion is removed so that 3 1 8 1 8 0 and consequently the border intervention is zero according to alston smith and vercammen the instrument is now inefficient and has no redistributive role the reader will note that this thought experiment has said nothing about supporting farm incomes and so has nothing whatsoever to do with efficient redistribution of course the definition is false it follows that a domestic distortion arising from the excess burden argument 3 1 8 8 0 does not make an export subsidy efficient the export subsidy having only a beta effect does not have a redistributional role the second disagreement emerges from the comment that holloway uses an idiosyncratic definition of the relevant objective function of the government alston smith and vercammen p 543 paragraph 2 the objective function that generates equations 1 and 2 see the appendix is the same as the objective function used by gardner 1995 when he first questioned alston carter and smith s claim that a domestic distortion can make a border intervention efficient in transferring surplus from consumers and taxpayers to farmers the objective function used by gardner 1995 is the same objective function used in the contributions that precede it and thus defines the literature on the debate about borderversus domestic intervention streeten yeh paarlberg 1984 1985 orden gardner 1985 the objective function in the latter literature is the same as the one implied in another literature that originates from wallace and includes most notably gardner 1983 but also alston and hurd amer j agr econ 86 2 may 2004 549 552 copyright 2004 american agricultural economics association this content downloaded on tue 15 jan 2013 07 58 41 am all use subject to jstor terms and conditions 550 may 2004 amer j agr econ the objective function in holloway is this same objective function it is of course marshallian surplus 1 the third disagreement concerns scholarship the comment does not seem to be cognizant of several important papers especially bhagwati and ramaswami and bhagwati both of which precede corden 1974 1997 but also lipsey and lancaster and moschini and sckokai one important aspect of alston and hurd and one extremely important result in holloway this oversight has some unfortunate repercussions first it misdirects to the wrong origins of intellectual property second it misleads about the appropriateness of some welfare calculations third it prevents alston smith and vercammen from linking a finding in holloway pp 242 43 with an old theorem lipsey and lancaster that settles the controversy alston carter and smith 1993 1995 gardner 1995 and presently alston smith and vercammen about the efficiency of border intervention in the presence of domestic distortions

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

the politics of labor market reform in coordinated welfare capitalism comparing sweden germany and south korea coordinated welfare capitalism has been subject to comprehensive change since the 1990s with workfare measures and the deregulation of employment protection at the heart of labor market reforms developments in sweden germany and south korea challenge not only the assumption of relative stability that is commonly associated with the study of coordinated market economies but also the assertion that this stability is associated with the persistence of established political coalitions the authors contend that a collapse of longstanding welfare state coalitions is the key political driver of labor market reform with the withdrawal of employers from previous welfare settlements at the center of this development

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

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

partial market liberalization and the efficiency of policy reform the case of the european dairy sector this article analyzes the efficiency of partial market liberalization and policy reform with an application to the european dairy sector in a second best world partial moves toward market liberalization are not always efficiency improving we develop a general equilibrium model to investigate the efficiency implications of discrete changes in government policy the analysis covers price and quantity instruments used in both domestic and trade policy we derive simple conditions under which partial market liberalization is efficiency improving we apply the approach to agricultural policy reform in the european dairy sector and identify market liberalization scenarios that are not efficiency improving

the distributional effect of the rice policy in japan 1986 2010 abstract this study aims to evaluate the distributional effect of the governmental rice policy in japan on producers consumers and government expenditures from 1986 to 2010 using a partial equilibrium model policy measures include government purchase of rice output payment and acreage control the simulation result shows that acreage control has been the principal policy measure for transferring income to producers especially since the enforcement of the wto agreement on agriculture acreage control is the policy measure with the lowest total efficiency and highest budgetary efficiency this result implies that the government s goal of transferring income to producers with minimum government cost has been achieved through a combination of policy measures

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

wto ministerial conference in singapore environmental diversity versus harmonization 1 introductionin december 1996 a newera of the international trade regime started with the rstwto ministerial conferencein singapore substantialprogress hasbeenachievedin freeing trade in information technology products and a north south collision oninternational labour standards has been averted however these successes over shadow the apparant stagnation in the area of trade and environment at last aftermanyyearsofintensivediscussions manyhadhopedthatthe rstwtoministerialconferencewouldaddressthissensitivepolicy eld outofthewiderangeofissuesthat can be dealt with under this heading two gure prominently trade measurespursuantto multilateral environmentalagreementsandeco labellingschemes thisnote rstly tries to explain why exactly these two issues draw most of the atten tion of policymakers and secondly discusses how these issues can be resolvedagainst the background of established welfare theory it also tries to make clearwhy the ministers in singapore pussyfooted around these issues and only decidedthat the wto committee on trade and environment has to continue its explora tory work to come to grisp with these issues insights from the literature on thetrade environment interface are rst summarized in eight propositions 2 propositions on trade and environmentbefore setting forth the propositions it is good to knowthat in analyticalstudies ontrade and environment the following distinctions are usually made first there areon the one hand local and national environmental problems and on the other handtransboundary i e international and global environmental problems the formerrefer to externalities caused by domestic environmental distortions that do notexpell beyond national borders the latter refer to environmental problems thataffect welfare both in the home country and in one or more foreign countries

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

determinants of labour s income share in the era of financialisation numerous studies have analysed the decline in the labour share of income but only few have linked it to the increase in financialisation the process of financialisation can roughly be described as an increasing importance of the financial sector that had an impact on the distribution between wages and profits on the one hand and retained earnings and financial income in the form of dividends and interests on the other hand this article seeks to explore the relationship between financialisation and labour s share of income using a time series cross sectional dataset of 13 countries over the time period from 1986 until 2007 the results suggest that there is indeed a relationship between increasing dividend and interest payments of non financial corporations and the decline of the share of wages in national income other factors that can account for the decline relate to globalisation and a decrease in the bargaining power of labour

goals and consequences of rice policy in japan 1965 80 the change in welfare of producers and consumers government cost and the deadweight loss arising from the various forms of government interventions into the rice market in order to protect domestic producers in japan are estimated in a partial equilibrium framework results of the quantitative analysis indicate that the motivation of the government was to minimize budget costs in achieving the target level of producer price support while consumer welfare had an insignificant weight in the government s objective function it is aiso found that acreage control is a second best policy to reduce social inefficiency produced from other forms of market distortions

taxes and subsidies in vertically related markets in the framework of a two country two good partial equilibrium model where one of the commodities the bulk commodity is an intermediate input in the production of the second good the processed good we assume that the government wishes to transfer income to both bulk commodity and processed good producers our analysis is concerned with efficient redistribution the instruments are subsidies or taxes and there is an opportunity cost of public funds we use the targeting principle to characterize the set of optimal subsidies or taxes applied on both the bulk commodity and the final good in this vertically related market structure the theoretical analysis is illustrated using the example of cereals the bulk commodity and pork and poultry the processed good in the european union

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

international trade and environmental regulation time series evidence and cross section test this paper examines empiricallywhether more stringent domestic environmental policiesreduce the international competitiveness ofenvironmentally sensitive goods esgs our timeseries evidence indicates that there are no systematicchanges in trade patterns of esgs in the last threedecades despite the introduction of more stringentenvironmental regulations in most of the developedcountries in the 1970s and 1980s this observedphenomenon is then subjected to a multi countryeconometric test using an extended gravity equationframework the test suggests that overall morestringent environmental regulations do not reducetotal exports exports of esgs and exports ofnon resource based esgs neither was there anyevidence to support the hypothesis that new tradebarriers emerge to offset the effects of morestringent environmental regulations

the politics of retrenchment in a social democratic welfare state reform of swedish pensions and unemployment insurance what explains the origins and pattern of retrenchment dynamics in swedish old age pensions and unemployment insurance during the 1990s although the economic crisis created pressure to scale back both programs the author argues that retrenchment only occurred when and where the social democratic party and some segments of the labor movement supported change this finding suggests that the political importance of organized labor in retrenchment politics depends on the relationship between welfare state programs and interest group structure when interest group structure is characterized by solidaristic centralized encompassing organizations the old class based power resource model has more explanatory bite than pierson s new politics of the welfare state approach

implicit policy preferences and the assessment of negotiable trade policy reforms abstract formal multilateral trade negotiations increase the pressure brought to bear on protectionist economies by foreign interests this paper explores the hypothesis that successful negotiations yield mixes of policy reforms which contribute to internationalist objectives but which minimally disturb the prior domestic political market equilibrium this disturbance is measured using weighted objective functions the weights in which embody revealed policy preferences governments are assumed to reflect these preferences in a strategic trade policy formation process which uses empirically based conjectures as to the responses of other governments and private agents the approach is applied to the negotiations on agricultural trade policy and in particular to the protectionist common agricultural policy of the european community

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

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

welfare state retrenchment revisited entitlement cuts public sector restructuring and inegalitarian trends in advanced capitalist societies in recent years it has become commonplace for comparativists to emphasize the resilience of welfare states in advanced capitalist societies and the failure of neoliberal efforts to dismantle the welfare state challenging some tenets of the resilience thesis this article seeks to broaden the discussion of welfare state retrenchment the authors argue that a sharp deceleration of social spending has occurred in most oecd countries since 1980 that welfare states have failed to offset the rise of market generated inequality and insecurity and that welfare programs have become less universalistic they stress the distributive and political consequences of market oriented reforms of the public sector

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

credit market imperfections and the distribution of policy rents this article shows that credit market imperfections have important implications for the distribution of policy rents in a model with land as fixed factor and credit market imperfections when an area payment is given land rents go up by more than the subsidy on aggregate farms may lose from the subsidy the results depend on the extent to which subsidies have direct and indirect effects on the credit constraints on whether farms rent or own land and on farm heterogeneity

labor markets production strategies and wage bargaining institutions the swedish employer offensive in comparative perspective transformed patterns of labor market governance occupy a central place in the study of contemporary west european political economies here detailed analysis of the dramatic decentralization of wa

cooperative game theory and the measurement of political power many studies using the political preference function ppf approach to measure the political powers of agricultural interest groups have been criticized for offering little theoretical justification for their methodology zusman p 447 beghin and karp p 51 bullock 1994 it has been claimed that cooperative game theory developed by nash 1950 1953 and harsanyi 1963 1977 provides a formal theoretical basis for ppf methodology zusman rausser and zusman 1992 forthcoming zusman and amiad beghin beghin and karp in this paper i present a brief discussion of the geometry of cooperative game theory and discuss and critique studies that have attempted to apply it to empirical studies of the political economy of agriculture

impacts of minimum quality standards imposed through marketing orders or related producer organizations we analyze the impacts of minimum quality standards mqs imposed by producers acting collectively through a producer organization such as a marketing order mqs imposed in a competitive market can never enhance social welfare because in general an mqs creates two deadweight losses one due to inefficient enhancement of product quality and a second due to wastage of the low quality product any mqs that a competitive industry implements based upon a profit criterion causes all consumers in the market to be harmed however an mqs may be preferred relative to supply control as a second best instrument for transferring income to producers