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A Welfare Analysis of the U.S. Ethanol Subsidy

Listed author(s):
  • Xiaodong Du
  • Dermot J. Hayes
  • Mindy L. Mallory

Based on an analytical model of multiple interconnected markets including corn, ethanol, gasoline, and transportation fuel, this study estimates the welfare changes for consumers and producers resulting from ethanol production and related support polices in 2007. The welfare estimation takes into account the fact that the ethanol program was implemented in a market that had already been distorted by other programs. The results suggest a total social cost of about $0.89 billion for given market parameters. We validate the model's underlying assumption and test for the results' sensitivity to assumed parameters. Copyright 2009 Agricultural and Applied Economics Association

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Article provided by Agricultural and Applied Economics Association in its journal Review of Agricultural Economics.

Volume (Year): 31 (2009)
Issue (Month): 4 (December)
Pages: 669-676

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Handle: RePEc:oup:revage:v:31:y:2009:i:4:p:669-676
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  1. Daniel J. Graham & Stephen Glaister, 2002. "The Demand for Automobile Fuel: A Survey of Elasticities," Journal of Transport Economics and Policy, University of Bath, vol. 36(1), pages 1-25, January.
  2. Thaeripour, Farzad & Tyner, Wallace E., 2007. "Ethanol subsidies, Who gets the benefits?," Biofuels, Food and Feed Tradeoffs, Biofuels, Food and Feed Tradeoffs Conference, April 12-13, 2007, St, Louis, Missouri 48776, Farm Foundation.
  3. Amani Elobeid & Simla Tokgoz, 2008. "Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 918-932.
  4. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
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