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Estimating the Effects of U.S. Distortions in the Ethanol Market Using a Partial Equilibrium Trade Model

Author

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  • Martinez-Gonzalez, Ariadna
  • Sheldon, Ian M.
  • Thompson, Stanley R.

Abstract

In this paper we assess the impact of the elimination of trade distortions on imports from Brazil to the U.S. For this purpose, we estimate a partial equilibrium trade model - an ethanol export supply function for Brazil and an ethanol import demand function for the U.S.-, based on annual data from 1975 to 2006, and use the results to compute a 'back-of-the-envelope' measure of the deadweight loss derived from those trade distortions as well as one derived from producing the 35 billion gallons proposed in the 'Twenty in Ten' 2007 State of the Union Policy Initiative assuming the distortions are not eliminated. Two-stage least squares is used to estimate both functions, the world price of ethanol being treated as endogenous. This paper supports the idea that the U.S. and Brazil would reap gains from trade if trade distortions were eliminated.

Suggested Citation

  • Martinez-Gonzalez, Ariadna & Sheldon, Ian M. & Thompson, Stanley R., 2007. "Estimating the Effects of U.S. Distortions in the Ethanol Market Using a Partial Equilibrium Trade Model," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9802, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea07:9802
    DOI: 10.22004/ag.econ.9802
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    Cited by:

    1. van Tol, M.C.M. & Moncada, J.A. & Lukszo, Z. & Weijnen, M., 2021. "Modelling the interaction between policies and international trade flows for liquid biofuels: an agent-based modelling approach," Energy Policy, Elsevier, vol. 149(C).
    2. Unknown, 2013. "Journal of International Agricultural Trade and Development, Volume 09, Number 1, 2013," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 9(1), pages 140-140.
    3. 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.
    4. Dong Hee Suh & Charles B. Moss, 2017. "Dynamic adjustment of ethanol demand to crude oil prices: implications for mandated ethanol usage," Empirical Economics, Springer, vol. 52(4), pages 1587-1607, June.
    5. Yano, Yuki & Blandford, David & Surry, Yves R., 2010. "The Implications of Alternative U.S. Domestic and Trade Policies for Biofuels," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91832, Agricultural Economics Society.
    6. Tala H. Qtaishat & Mohammad S. El-Habbab & Dan P. Bumblauskas, 2019. "Welfare Economic Analysis of Lifting Water Subsidies for Banana Farms in Jordan," Sustainability, MDPI, vol. 11(18), pages 1-10, September.

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    Keywords

    Resource /Energy Economics and Policy;

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