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Targeted Agricultural Export Subsidies and Social Welfare

Author

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  • Philip C. Abbott
  • Philip L. Paarlberg
  • Jerry A. Sharples

Abstract

Global export subsidies are known to be welfare reducing. This paper demonstrates that a small targeted subsidy can increase the welfare of the subsidizing country by exploiting differences in excess demand elasticities. Targeted export subsidies can also increase the subsidizing country's welfare by exploiting transportation cost differences, excess supply elasticities of competitors, or excess demand elasticities of markets supplied by competitors when markets are shared. An empirical model of the world wheat market illustrates the theoretical conclusions. An optimal targeted subsidy scheme causes a small increase in U.S. welfare but with major disruptions in world trade flows.

Suggested Citation

  • Philip C. Abbott & Philip L. Paarlberg & Jerry A. Sharples, 1987. "Targeted Agricultural Export Subsidies and Social Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 723-732.
    • Handle: RePEc:oup:ajagec:v:69:y:1987:i:4:p:723-732.
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    Cited by:

    1. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Causes and Consequences of the Export Enhancement Program for Wheat," NBER Chapters, in: The Effects of US Trade Protection and Promotion Policies, pages 273-296, National Bureau of Economic Research, Inc.
    2. Ballenger, Nicole S., 1990. "Export Enhancement, Exporting Firms, And Efficiency Of International Commodity Markets," 1990 Annual meeting, August 5-8, Vancouver, Canada 270895, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Fuller, Frank Harland, 1996. "The location of marginal production for value-added and intermediate goods: optimal policies and trade volumes," ISU General Staff Papers 1996010108000012147, Iowa State University, Department of Economics.
    4. Dahl, Bruce L. & Johnson, D. Demcey & Wilson, William W. & Gustafson, Cole R., 1995. "Credit Guarantee Programs in International Grain Markets: Background and Issues," Agricultural Economics Reports 23331, North Dakota State University, Department of Agribusiness and Applied Economics.
    5. Şişman, Muhammet Yunus, 2017. "An Economic Welfare Analysis Of Agricultural Subsidies And Inventory Holdings: An Application To The Hazelnut Industry1," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 5(4), October.
    6. Wang, W. & Wei, L., 2018. "China s Agricultural Price Control Policy and its Price and Welfare Implications: The Case of Soybean," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277342, International Association of Agricultural Economists.
    7. Elbehri, Aziz & Leetmaa, Susan E., 2001. "How Significant Are Export Subsidies To Agricultural Trade? Trade And Welfare Implications Of Global Reforms," 2001 Annual meeting, August 5-8, Chicago, IL 20518, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Saxowsky, David M. & Krause, Joyce Hall & Gustafson, Cole R., 1998. "Export Enhancement Strategies For Small And Medium Rural And Agricultural Firms," Agricultural Economics Reports 23307, North Dakota State University, Department of Agribusiness and Applied Economics.
    9. Young, Linda M. & Abbott, Philip C. & Leetmaa, Susan E., 2001. "Export Competition: Issues And Options In The Agricultural Negotiations," Commissioned Papers 14624, International Agricultural Trade Research Consortium.
    10. Zhang, Dengjun & Asche, Frank & Oglend, Atle, 2014. "Ethanol and trade: An analysis of price transmission in the US market," Energy Economics, Elsevier, vol. 42(C), pages 1-8.
    11. H. Guyomard & L. P. Mahé & C. Tavéra & T. Trochet, 1991. "Technical Change And Ec‐Us Agricultural Trade Liberalisation," Journal of Agricultural Economics, Wiley Blackwell, vol. 42(2), pages 119-137, May.
    12. Sheldon, Ian M. & Pick, Daniel H. & McCorriston, Steve, 2001. "Export Subsidies And Profit-Shifting In Vertical Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-17, July.
    13. Kallio, Panu K.S. & Abbott, Philip C., 1998. "Export Subsidies And Switching Costs In An Imperfectly Competitive International Wheat Market," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20789, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. repec:ags:aare02:125165 is not listed on IDEAS
    15. Haley, Stephen L., 1995. "Product Differentiation in Wheat Trade Modeling," Technical Bulletins 156766, United States Department of Agriculture, Economic Research Service.
    16. Grigsby, S. Elaine & Dixit, Praveen M., 1986. "Alternative Export Strategies And U.S. Agricultural Policies For Grains And Oilseeds, 1950-83," Staff Reports 277896, United States Department of Agriculture, Economic Research Service.
    17. Bailey, Kenneth W. & Houck, James P., 1989. "An Analysis of the Export Enhancement Program for Wheat," CNFAP Staff Reports 244129, Food and Agricultural Policy Research Institute (FAPRI).
    18. Herlihy, Michael T. & Young, C. Edwin, 1996. "Issues in Agricultural Commodity Policy," Staff Reports 278808, United States Department of Agriculture, Economic Research Service.
    19. Haley, Stephen L., 1988. "Targeting Of U.S. Agricultural Export Subsidies: A Theoretical Analysis," Staff Reports 278018, United States Department of Agriculture, Economic Research Service.
    20. Seitzinger, Ann Hillberg & Paarlberg, Philip L., 1989. "A Survey of Theoretical and Empirical Literature Related to Export Assistance," Staff Reports 278240, United States Department of Agriculture, Economic Research Service.
    21. Lee, Dae-Seob & Kennedy, P. Lynn, 2002. "A Game Theoretic Analysis Of U.S. Rice Export Policy: The Case Of Japan And Korea," 2002 Annual meeting, July 28-31, Long Beach, CA 19686, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    22. Roberto Gabriele & Marco Zamarian & Enrico Zaninotto, 2006. "Assessing the economic impact of public industrial policies: an empirical investigation on subsidies," ROCK Working Papers 039, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
    23. Rude, James, 2000. "Reform of Agricultural Export Credit Programs," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 1(2), pages 1-13.

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