Comparison of the price adjustment program and subsidy scheme in Japan: Evaluation of domestic sugar support policy to internalize positive externalities

Takashi Fujimoto and Masahide Watanabe

Japan and the World Economy, 2022, vol. 61, issue C

Abstract: Fiscally constrained governments prefer imposing tariffs instead of providing subsidies, despite tariffs distorting markets more than subsidies. Japan’s price adjustment program is designed to support the domestic sugar industry by imposing a tariff on imports and by subsidizing domestic production using tariff revenues. This study compared the program and a subsidy scheme using benefit/cost ratios and the degree of trade distortion. The main findings and their policy implications are as follows: 1) because the benefit/cost ratio for the program is greater than one, the program would be beneficial for Japanese people, 2) the ratios and trade distortions for the two policies are similar, thus the program works well when fiscal spending is constrained, as it requires less government spending, 3) using tariffs instead of the other two policies results in a smaller benefit/cost ratio and greater market distortion, 4) people are uncertain about their preference for the program, making them more accepting of it.

Keywords: Sugar support policy; Impure public good; Willingness to pay; Preference uncertainty; Benefit/cost ratio; Trade distortion (search for similar items in EconPapers)
JEL-codes: C25 H23 Q18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0922142522000044
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:61:y:2022:i:c:s0922142522000044

DOI: 10.1016/j.japwor.2022.101118

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().