A Welfare Analysis of the U.S. Ethanol Subsidy

Xiaodong Du (), Dermot Hayes () and Mindy Baker ()

Staff General Research Papers from Iowa State University, Department of Economics

Abstract: 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.

Keywords: consumer surplus; deadweight loss; ethanol; subsidy; substitution. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-ene
Date: 2008-11-04
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Persistent link: http://EconPapers.repec.org/RePEc:isu:genres:13003

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