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Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony

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  • Rucker, Randal R
  • Thurman, Walter N
  • Sumner, Daniel A

Abstract

Regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs. In this paper, the authors use a unique cross-section, time-series data set from North Carolina to quantify the welfare effects of transfer restrictions for poundage quota under the U.S. flue-cured tobacco program. The authors find that the deadweight costs of such restrictions are small but that the distributional effects are substantial. The authors analyze congressional testimony on quota transfer legislation and conclude that their estimates of the distributional effects are consistent with expressed views of market participants. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jpolec:v:103:y:1995:i:1:p:142-75
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    References listed on IDEAS

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    1. Giancarlo Moschini, 1989. "Modeling the Supply Response of Supply-Managed Industries: A Review of Issues," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 37(3), pages 379-392, November.
    2. Lilyan E. Fulginiti & Richard K. Perrin, 1992. "Theory and Measurement of Producer Response under Quotas, The," Center for Agricultural and Rural Development (CARD) Publications 92-wp94, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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    5. James A. Seagraves, 1969. "Capitalized Values of Tobacco Allotments and the Rate of Return to Allotment Owners," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 51(2), pages 320-334.
    6. Johnson, Ronald N & Gisser, Micha, 1981. "The Definition of a Surface Water Right and Transferability," Journal of Law and Economics, University of Chicago Press, vol. 24(2), pages 273-288, October.
    7. 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.
    8. Maloney, Michael T. & Yandle, Bruce, 1984. "Estimation of the cost of air pollution control regulation," Journal of Environmental Economics and Management, Elsevier, vol. 11(3), pages 244-263, September.
    9. Fulginiti, Lilyan & Perrin, Richard, 1993. "The Theory and Measurement of Producer Response under Quotas," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 97-106, February.
    10. Ross Eckert, 1973. "On the incentives of regulators: The case of taxicabs," Public Choice, Springer, vol. 14(1), pages 83-99, March.
    11. Lott, John R, Jr, 1987. "Licensing and Nontransferable Rents," American Economic Review, American Economic Association, vol. 77(3), pages 453-455, June.
    12. Rucker, Randal R & Thurman, Walter N, 1990. "The Economic Effects of Supply Controls: The Simple Analytics of the U.S. Peanut Program," Journal of Law and Economics, University of Chicago Press, vol. 33(2), pages 483-515, October.
    13. Hoover, Dale M. & Efstratoglou Todoulos, Sophia I., 1973. "Economic Effects Of Intercounty Transfer Of Flue-Cured Tobacco Quota," Department of Economics and Business - Archive 259736, North Carolina State University, Department of Economics.
    14. Anderson, James E, 1985. "The Relative Inefficiency of Quotas: The Cheese Case," American Economic Review, American Economic Association, vol. 75(1), pages 178-190, March.
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    Cited by:

    1. 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.
    2. Skully, David W., 2000. "U.S. Trqs For Peanuts, Sugar, And Tobacco: Historical Allocation And Nondiscrimination," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), pages 1-10, April.
    3. Squires, Dale, 2016. "Firm behavior under quantity controls: The theory of virtual quantities," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 70-86.
    4. Bridgman, Benjamin & Qi, Shi & Schmitz, James A., 2015. "Cartels Destroy Productivity: Evidence from the New Deal Sugar Manufacturing Cartel, 1934-74," Staff Report 519, Federal Reserve Bank of Minneapolis.
    5. Haynes, Dwayne J. & Schmitz, Andrew & Schmitz, Troy G., 2015. "Producer Compensation under Government Programs: What Should the Magnitude Be?," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196887, Southern Agricultural Economics Association.
    6. Nancy H. Chau & Harry de Gorter, 2005. "Disentangling the Consequences of Direct Payment Schemes in Agriculture on Fixed Costs, Exit Decisions, and Output," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1174-1181.
    7. Just, David R. & Kropp, Jaclyn D., 2009. "Production Incentives from Static Decoupling: Entry, Exit and Use Exclusion Restrictions," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49158, Agricultural and Applied Economics Association.
    8. Grafton, R Quentin & Squires, Dale & Fox, Kevin J, 2000. "Private Property and Economic Efficiency: A Study of a Common-Pool Resource," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 679-713, October.
    9. Kropp, Jaclyn D. & Whitaker, James B., 2009. "The Impact of Decoupled Payments on the Cost of Operating Capital," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49311, Agricultural and Applied Economics Association.
    10. 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.
    11. Bureau, Jean-Christophe & Guyomard, Herve & Requillart, Vincent, 2001. "On inefficiencies in the European sugar regime," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 659-667, August.
    12. Jaclyn D. Kropp & Ani L. Katchova, 2011. "The effects of direct payments on liquidity and repayment capacity of beginning farmers," Agricultural Finance Review, Emerald Group Publishing, vol. 71(3), pages 347-365, November.
    13. Jaclyn D. Kropp & James B. Whitaker, 2011. "The impact of decoupled payments on the cost of operating capital," Agricultural Finance Review, Emerald Group Publishing, vol. 71(1), pages 25-40, May.
    14. Skully, David W., 1999. "The Economics Of Trq Administration," Working Papers 14584, International Agricultural Trade Research Consortium.
    15. Andrew Schmitz & Dwayne J. Haynes & Troy G. Schmitz, 2016. "Alternative Approaches to Compensation and Producer Rights," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 439-454, September.
    16. Skully, David W., 2001. "Economics of Tariff-Rate Quota Administration," Technical Bulletins 184332, United States Department of Agriculture, Economic Research Service.
    17. repec:spr:empeco:v:55:y:2018:i:3:d:10.1007_s00181-017-1316-4 is not listed on IDEAS
    18. Muth, Mary K & Rucker, Randal R & Thurman, Walter N & Chuang, Ching-Ta, 2003. "The Fable of the Bees Revisited: Causes and Consequences of the U.S. Honey Program," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 479-516, October.
    19. Bogetoft, Peter & Jensen, Peter Max Friis & Nielsen, Kurt & Olesen, Henrik Ballebye & Olsen, Rene H., 2002. "Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges," Unit of Economics Working Papers 24181, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    20. Peckham, Janet G. & Kropp, Jaclyn D., 2012. "Decoupled Direct Payments under Base Acreage and Yield Updating Uncertainty: An Investigation of Agricultural Chemical Use," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(2), pages 1-17, August.
    21. Sumner, Daniel A., 1995. "Farm Programs And Related Policy In The United States," Proceedings of the 1st Agricultural and Food Policy Systems Information Workshop, 1995: Understanding Canada\United States Grain Disputes 16742, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.

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