The United States produced about 80 percent of the world's cotton in the decades prior to the Civil War. How much monopoly power did the United States possess in the world cotton market and what would have been the effect of an optimal export tax? This paper estimates the elasticity of foreign demand for U.S. cotton exports and uses the elasticity in a simple partial equilibrium model to calculate the optimal export tax and its effect on prices, trade, and welfare. The results indicate that the export demand elasticity for U.S. cotton was about -1.7 and that the optimal export tax of about 50 percent would have raised U.S. welfare by about $6 million, about 0.1 percent of U.S. GDP or about 0.5 percent of the South's GDP.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8689.
Length: Date of creation: Dec 2001 Date of revision: Handle: RePEc:nbr:nberwo:8689
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Find related papers by JEL classification: F1 - International Economics - - Trade N3 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth
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