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Welfare Analysis of the U.S. Ethanol Subsidy, A



Based on a transparent analytical model of multiple 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 second-best gain from eliminating loan deficiency payments. The results suggest the total social cost is about $0.78 billion for given market parameters. We validate the model's underlying assumption and test for the results' sensitivity to assumed parameters.

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  • Xiaodong Du & Dermot J. Hayes & Mindy L. Baker, 2008. "Welfare Analysis of the U.S. Ethanol Subsidy, A," Center for Agricultural and Rural Development (CARD) Publications 08-wp480, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:08-wp480

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    References listed on IDEAS

    1. Simla Tokgoz & Amani Elobeid & Jacinto F. Fabiosa & Dermot J. Hayes & Bruce A. Babcock & Tun-Hsiang (Edward) Yu & Fengxia Dong & Chad E. Hart & John C. Beghin, 2007. "Emerging Biofuels: Outlook of Effects on U.S. Grain, Oilseed, and Livestock Markets," Food and Agricultural Policy Research Institute (FAPRI) Publications 07-sr101, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
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    1. repec:spr:nathaz:v:87:y:2017:i:3:d:10.1007_s11069-017-2837-z is not listed on IDEAS

    More about this item


    consumer surplus; deadweight loss; ethanol; subsidy; substitution.;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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