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An Allais Measure of Production Sector Waste Due to Quotas

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  • Lilyan E. Fulginiti
  • Richard K. Perrin

Abstract

In this paper we adapt a partial equilibrium approach of Allais and Diewert to measure the efficiency loss in the producing sector due to quotas. The measure of waste is the additional profits available by reallocation subject to constraints that the welfare of persons and firms outside the sector is unaffected. It is relevant to a sector which faces fixed prices for some commodities, but endogenous prices for others. Tobacco quotas in the United States are estimated to have caused quota-induced producer sector waste of approximately $95 million per year during 1950–82, or about 3% of the average value of the crop.

Suggested Citation

  • Lilyan E. Fulginiti & Richard K. Perrin, 1995. "An Allais Measure of Production Sector Waste Due to Quotas," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(4), pages 865-874.
    • Handle: RePEc:oup:ajagec:v:77:y:1995:i:4:p:865-874.
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    1. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    2. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-1019, October.
    3. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    4. Vousden,Neil, 1990. "The Economics of Trade Protection," Cambridge Books, Cambridge University Press, number 9780521346696, January.
    5. Paul R. Johnson & Daniel T. Norton, 1983. "Social Cost of the Tobacco Program Redux," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(1), pages 117-119.
    6. Walter N. Thurman, 1991. "Applied General Equilibrium Welfare Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(5), pages 1508-1516.
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    Cited by:

    1. Aldanondo, Ana Maria & Puertolas, Javier, 2002. "International Quota Transfer and Intermediate Goods," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24851, European Association of Agricultural Economists.
    2. Kono, Tatsuhito & Kishi, Akio, 2018. "What is an appropriate welfare measure for efficiency of local public policies inducing migration?," Mathematical Social Sciences, Elsevier, vol. 91(C), pages 25-35.

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