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

Schmitz Andrew (), Haynes Dwayne J. and Schmitz Troy G.
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Schmitz Andrew: University of Florida – Food and Resource Economics, Gainesville, Florida, USA
Haynes Dwayne J.: University of Florida – Food and Resource Economics, Gainesville, Florida, USA
Schmitz Troy G.: Arizona State University – Morrison School of Agribusiness and Resource Management, Mesa, Arizona, USA

Journal of Benefit-Cost Analysis, 2013, vol. 4, issue 3, 375-389

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.

Keywords: compensation; consumer tax; government buyout; quota values (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/jbca-2013-0010

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