Efficient Redistribution through Commodity Markets

Abstract

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.

Income Distributional Effects of CAP Subsidies

“…According to theoretical studies, CDP and RDP are expected to have the strongest impact on input and output prices, and hence a significant share of policy rents may be leaked to other market participants (such as consumers and input suppliers) (for example, Floyd, 1965; Income distributional effects of CAP subsidies Alston and James, 2002;de Gorter and Meilke, 1989;Gardner, 1983;Guyomard et al, 2004;Salhofer, 1996;Swinnen, 2006, 2009). The reason is that both CDP and RDP are linked to a specific input use (for example, land) or output produced, and thus stimulate farms' demand on input markets and higher supply of production on output markets.…”

Killing two birds with one stone: US and EU biofuel programmes

“…9 The Pigouvian rule calls for an environmental standard that nulli…es this surplus. The …rst term of (7) corresponds to the marginal social surplus of biofuel production, with the marginal social loss of subsidizing the biofuel sector given by (1 + )[C X (X ; e ) p E ] and the value of the social bene…t of GHG mitigation given by q.…”

Understanding China's grain procurement policy from a perspective of optimization

“…With these combinations, the government extracts the entire producer surplus. This is the extreme version of the case alleged by Gardner (1983) that the production-control approach in the form of Stalinist delivery quotas at state-set prices could be used to redistribute all producer surplus to consumers with relatively small deadweight loss. Another set of interesting P , Q combinations is given by segment OM in Fig.…”

“…The endogenous theory of economic policy that recognizes policymakers as rational agents maximizing their political preference function subject to political and economic constraints has been widely applied in the study of government intervention in the farm commodity markets (Gardner, 1983(Gardner, , 1987Oehmke and Yao, 1990;Rausser and Foster, 1990;Bullock, 1994). Based on the interactions between the government and various interest groups whose welfare will be affected by the policy concerned, the political preference function is a useful tool to analyze government policies regarding the pricing and trade of grain in the OECD countries including the US, Japan, and Korea (Oehmke and Yao, 1990;Lee and Kennedy, 2006).…”