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Economic Rents Under Supply Controls with Marketable Quota

Author

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  • Bruce A. Babcock
  • William E. Foster

Abstract

We analyze the distribution of economic rent between owners and renters of marketable production quotas and examine how this distribution changes with increases in marginal costs. While quota owners unambiguously lose because of a marginal cost increase, quota renters may gain, depending on whether the marginal cost shift is divergent, parallel, or convergent. Using output and input prices, county production quotas, and quota rental rate data, we estimate a marginal cost function for North Carolina flue-cured tobacco to demonstrate how wage increases affect owners' and renters' welfare.

Suggested Citation

  • Bruce A. Babcock & William E. Foster, 1992. "Economic Rents Under Supply Controls with Marketable Quota," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 630-637.
    • Handle: RePEc:oup:ajagec:v:74:y:1992:i:3:p:630-637.
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    File URL: http://hdl.handle.net/10.2307/1242575
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    Citations

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    Cited by:

    1. Raper, Kellie Curry & Love, H. Alan, 1999. "MONOPSONY POWER IN MULTIPLE INPUT MARKETS: A Nonparametric Approach," Staff Paper Series 11656, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    2. Pavel Ciaian & d’Artis Kancs & Johan Swinnen, 2010. "EU Land Markets and the Common Agricultural Policy," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(3), pages 1-31.
    3. Bureau, Jean-Christophe, et al, 1997. "Quota Mobility in the European Sugar Regime," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 24(1), pages 1-30.
    4. Foster, William E. & Babcock, Bruce A., 1993. "Commodity Policy, Price Incentives, and the Growth in Per-Acre Yields," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 25(1), pages 253-265, July.
    5. Hervé Guyomard & Xavier Delache & Xavier Irz & Louis‐Pascal Mane, 1996. "A Microeconometric Analysis Of Milk Quota Transfer: Application To French Producers," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1‐4), pages 206-223, January.
    6. Kellie Curry Raper & H. Alan Love, 2007. "Market power in tobacco: Measuring multiple markets," Agribusiness, John Wiley & Sons, Ltd., vol. 23(1), pages 35-55.
    7. Louis-Pascal Mahé & Carole Ropars, 2001. "L'exploitation régulée d'une ressource renouvelable : inefficacité d'un rationnement factoriel et efficacité des quotas individuels transférables," Économie et Prévision, Programme National Persée, vol. 148(2), pages 141-156.
    8. Gregg Frasco & Chulho Jung, 2001. "When producer surplus underestimates rents," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(4), pages 393-405, December.
    9. Benny Overton & John Beghin & William Foster, 2017. "Phytosanitary Regulation and Agricultural Flows: Tobacco Inputs and Cigarettes Outputs," World Scientific Book Chapters, in: John Christopher Beghin (ed.), Nontariff Measures and International Trade, chapter 19, pages 327-337, World Scientific Publishing Co. Pte. Ltd..
    10. Rucker, Randal R & Thurman, Walter N & Sumner, Daniel A, 1995. "Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 142-175, February.
    11. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    12. Frederic Courleux & Herve Guyomard & Fabrice Levert, 2007. "Étude prospective sur le fonctionnement des marchés des droits au paiement et de la réserve nationale mis en place dans le cadre de la réforme de la PAC de juin 2003," Working Papers hal-01595356, HAL.
    13. Gregg Frasco, 2002. "A comparison of rents and producer surplus when industry input supply functions are interdependent," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(4), pages 403-413, December.
    14. Beghin, John C. & Blake Brown, A. & Hasyim Zaini, M., 1997. "Impact of domestic content requirement on the US tobacco and cigarette industries," Agricultural Economics, Blackwell, vol. 15(3), pages 201-212, January.
    15. Louis-Pascal Mahé & Carole Ropars, 1998. "Régulation de l'exploitation d'une ressource renouvelable : inefficacité d'un rationnement d'input et efficacité des quotas individuels transférables (QIT)," Post-Print hal-02349927, HAL.
    16. Chvosta, Jan & Rucker, Randal R. & Thurman, Walter N., 2001. "Peanut Quota Markets And Peanut Production After Fair," 2001 Annual meeting, August 5-8, Chicago, IL 20557, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Meilke, Karl D. & Sarker, Rakhal & Le Roy, Danny G., 1996. "Analyzing The Potential For Increased Trade In Dairy Products: A Canadian Perspective," Proceedings of the 2nd Agricultural and Food Policy Systems Information Workshop, 1996: Understanding Canada\United States Dairy Disputes 16959, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
    18. Kellie Curry Raper & H. Alan Love & C. Richard Shumway, 2000. "Determining market power exertion between buyers and sellers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 225-252.
    19. Xavier Delache & Herve Guyomard & Louis Pascal Mahe & Xavier Irz, 1994. "A micro-econometric analysis of milk quota transfer : application to France," Post-Print hal-01600204, HAL.
    20. Overton, Benny E. & Beghin, John C. & Foster, William E., 1995. "Phytosanitary Regulation and Agricultural Trade Flows: Tobacco Inputs and Cigarettes Outputs," Staff General Research Papers Archive 1590, Iowa State University, Department of Economics.
    21. Sckokai, Paolo, 2001. "The Common Agricultural Policy In Econometric Models," Working Papers 14800, National Institute of Agricultural Economics, Italy - INEA, Osservatorio Sulle Politiche Agricole dell'UE.
    22. Chen, Kevin Z. & Weerahewa, Jeevika, 1998. "Regulation, Market Power, And Advertising Effectiveness," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), pages 1-9, October.
    23. Antonio Alvarez & Carlos Arias & Luis Orea, 2006. "Explaining Differences in Milk Quota Values: The Role of Economic Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 182-193.
    24. Bullock, David S. & Dadakas, Dimitrios & Katranidis, Stelios D., 2009. "Measuring the Effects of Technology Change in Multiple Markets : Application to the Greek Cotton Yarn Industry," MPRA Paper 67204, University Library of Munich, Germany, revised 2012.

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