Measures of Distorting Support in the Context of Production Quotas

Herve Guyomard and Louis-Pascal Mahe

European Review of Agricultural Economics, 1994, vol. 21, issue 1, 5-30

Abstract: This paper provides a general framework for measuring farm support when both price and quantity policy instruments are used jointly. It is based on duality theory in production, i.e., on profit functions corresponding to different (dis-)equilibrium situations. Total Support is decomposed into a Neutral component and a Distorting part related to shadow prices of fixed quantities. An application to the reduction in support to the EC farm sector from 1986 to 1988 suggests that the EC could claim an extra 4.4 billion ECU of "credit" if the Distorting concept had been used in the GATT. Limitations of quota as second-best policies are pointed out. Copyright 1994 by Oxford University Press.

Date: 1994
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