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

  • Andrew Schmitz (a1), Dwayne J. Haynes (a1) and Troy G. Schmitz (a2)

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.

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Copyright

Corresponding author

Andrew Schmitz, University of Florida – Food and Resource Economics, 1130A McCarty Hall, Gainesville, Florida 32611, USA, e-mail: aschmitz@ufl.edu

References

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Dohlman, E., Foreman, L., & Da Pra, M. (2009). The post-buyout experience: Peanut and tobacco sectors adapt to policy reform. Economic Information Bulletin No. EIB-60, Economic Research Service, United States Department of Agriculture, Washington, D.C. Retrieved from http://www.ers.usda.gov/publications/eib60/.
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Keywords

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

  • Andrew Schmitz (a1), Dwayne J. Haynes (a1) and Troy G. Schmitz (a2)

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