The End of the Federal Tobacco Program: Economic Impacts of the Deregulation of U.S. Tobacco Production

A. Blake Brown, Randal R. Rucker and Walter N. Thurman

Review of Agricultural Economics, 2007, vol. 29, issue 4, pages 635-655

Abstract: In 2004, Congress ended the sixty-six-year-old federal tobacco program, effectively deregulating production and prices. With deregulation came a buyout package, with cigarette manufacturers agreeing to pay more than $3 billion in present value to quota owners and farmers. While the dollar values of compensation payments are known, the effects of the historic legislation on tobacco markets are uncertain. We examine these effects and their welfare consequences. We also consider the appropriateness of the buyout payments under alternative views of economic damages due to the quota system's demise. Copyright 2007 American Agricultural Economics Association

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