On the (De)Stabilization Effects of Biofuels: Relative Contributions of Policy Instruments and Market Forces
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.
Volume (Year): 35 (2010)
Issue (Month): 1 (April)
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- 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.
- Bruce A. Babcock, 2008.
"Distributional Implications of U.S. Ethanol Policy ,"
Review of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 30(3), pages 533-542.
- 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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