Price versus Quota Reductions: U.S. Flue-Cured Tobacco Policy

A. Blake Brown and Laura L. Martin

Journal of Agricultural and Applied Economics, 1996, vol. 28, issue 2, 445-452

Abstract: Declining domestic cigarette consumption, increased global competition, and loss of import restrictions indicate decreased demand for U.S. flue-cured tobacco. The effects of 10% declines in domestic and export demand are evaluated under a policy of reducing quota to maintain price versus a policy of allowing price to fall to maintain quota. Changes in prices, quantities, revenues, and economic rents are simulated. Losses to nonfarming quota owners are minimized under a policy of price maintenance, while losses in revenues to tobacco-producing areas are minimized by a policy of quota maintenance. Aggregate losses to tobacco growers are greater under a policy of quota maintenance.

Date: 1996
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