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Benefit-cost analysis: government compensation vs. consumer tax model

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  • Schmitz, Andrew
  • Haynes, Dwayne J.
  • Schmitz, Troy G.

Abstract

We provide a theoretical and empirical comparison of two historic production quota buyouts: the 2002 US Peanut Quota Buyout and the 2004 US Tobacco Quota Buyout. Producer compensation under the US Peanut Quota Buyout came from the treasury while the US Tobacco Buyout was paid for by a consumer tax (i.e., tobacco tax). Given these two buyouts, an important question arises: How does the method of compensation affect distribution and efficiency? Producers, consumers, and society favor a treasury buyout (TB) for several reasons. Producers are compensated considerably more under a TB, consumers are not burdened with the charge of funding the buyout, and society does not face additional efficiency losses due to the buyout.

Suggested Citation

  • Schmitz, Andrew & Haynes, Dwayne J. & Schmitz, Troy G., 2013. "Benefit-cost analysis: government compensation vs. consumer tax model," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 4(3), pages 375-389, December.
    • Handle: RePEc:cup:jbcoan:v:4:y:2013:i:03:p:375-389_00
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    Cited by:

    1. Haynes, Dwayne J. & Schmitz, Andrew & Schmitz, Troy G., 2015. "Producer Compensation under Government Programs: What Should the Magnitude Be?," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196887, Southern Agricultural Economics Association.
    2. Andrew Schmitz & Dwayne J. Haynes & Troy G. Schmitz, 2016. "Alternative Approaches to Compensation and Producer Rights," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 439-454, September.

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