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Benefit-cost analysis: government compensation vs. consumer tax model

Author

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  • Schmitz Andrew

    (University of Florida – Food and Resource Economics, Gainesville, Florida, USA)

  • Haynes Dwayne J.

    (University of Florida – Food and Resource Economics, Gainesville, Florida, USA)

  • Schmitz Troy G.

    (Arizona State University – Morrison School of Agribusiness and Resource Management, Mesa, Arizona, USA)

Abstract

We provide a theoretical and empirical comparison of two historic production quota buyouts: the 2002 US Peanut Quota Buyout and the 2004 US Tobacco Quota Buyout. Producer compensation under the US Peanut Quota Buyout came from the treasury while the US Tobacco Buyout was paid for by a consumer tax (i.e., tobacco tax). Given these two buyouts, an important question arises: How does the method of compensation affect distribution and efficiency? Producers, consumers, and society favor a treasury buyout (TB) for several reasons. Producers are compensated considerably more under a TB, consumers are not burdened with the charge of funding the buyout, and society does not face additional efficiency losses due to the buyout.

Suggested Citation

  • Schmitz Andrew & Haynes Dwayne J. & Schmitz Troy G., 2013. "Benefit-cost analysis: government compensation vs. consumer tax model," Journal of Benefit-Cost Analysis, De Gruyter, vol. 4(3), pages 375-389, December.
    • Handle: RePEc:bpj:jbcacn:v:4:y:2013:i:3:p:375-389:n:3
    DOI: 10.1515/jbca-2013-0010
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    References listed on IDEAS

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    5. Schmitz, Andrew & Schmitz, Troy G., 2010. "Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 1(1), pages 1-15, July.
    6. Dohlman, Erik & Foreman, Linda F. & Da Pra, Michelle, 2009. "The Post-Buyout Experience: Peanut and Tobacco Sectors Adapt to Policy Reform," Economic Information Bulletin 56628, United States Department of Agriculture, Economic Research Service.
    7. Usda Ers, 1978. "Situation & Outlook," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 0(1), April.
    8. Schmitz Andrew & Schmitz Troy G., 2010. "Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts," Journal of Benefit-Cost Analysis, De Gruyter, vol. 1(1), pages 1-15, July.
    9. Usda Ers, 1978. "Situation & Outlook," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 0(1), June.
    10. Andrew Schmitz & Troy G. Schmitz & Frederick Rossi, 2006. "Agricultural Subsidies in Developed Countries: Impact on Global Welfare ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(3), pages 416-425.
    11. Schmitz, Andrew & Schmitz, Troy G., 2010. "Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 1(01), pages 1-15, July.
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