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On the (De)Stabilization Effects of Biofuels: Relative Contributions of Policy Instruments and Market Forces

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Author Info

  • Gohin, Alexandre
  • Treguer, David

Abstract

Ethanol production has recently surged in response to biofuel policies and increased fossil oil prices. We develop a partial equilibrium model focused on U.S. corn-based ethanol production with downside risk-averse farmers to assess the consequences of ethanol production on agricultural volatility. We report substantial effects on the distribution of corn prices with increases in the variance of prices received by farmers. Risk-averse corn farmers still benefit due to the higher mean price effect. From a methodological perspective, this analysis reveals that downside risk aversion may be important.

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File URL: http://purl.umn.edu/61061
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 35 (2010)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:jlaare:61061

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Web page: http://waeaonline.org/
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Related research

Keywords: biofuels; policy; risk; Resource /Energy Economics and Policy;

References

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  1. Harry de Gorter & David R. Just, 2007. "The Welfare Economics of a Biofuel Tax Credit and the Interaction Effects with Price Contingent Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 477-488.
  2. Babcock, Bruce A., 2008. "Distributional Implications of U.S. Ethanol Policy," Staff General Research Papers 12936, Iowa State University, Department of Economics.
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Citations

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Cited by:
  1. Ramazan Sari & Shawkat Hammoudeh & Chia-Lin Chang & Michael McAleer, 2011. "Causality Between Market Liquidity and Depth for Energy and Grains," Working Papers in Economics 11/15, University of Canterbury, Department of Economics and Finance.
  2. Shawkat Hammoudeh & Soodabeh Sarafrazi & Chia-Lin Chang & Michael McAleer, 2011. "The Dynamics of Energy-Grain Prices with Open Interest," Documentos del Instituto Complutense de Análisis Económico 2011-18, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
  3. Natanelov, Valeri & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2013. "Crude oil–corn–ethanol – nexus: A contextual approach," Energy Policy, Elsevier, vol. 63(C), pages 504-513.
  4. Philip Abbott, 2013. "Biofuels, Binding Constraints and Agricultural Commodity Price Volatility," NBER Chapters, in: The Economics of Food Price Volatility National Bureau of Economic Research, Inc.

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