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

Published online by Cambridge University Press:  19 January 2015

Andrew Schmitz ,
Dwayne J. Haynes  and
Troy G. Schmitz
Andrew Schmitz*
Affiliation:
University of Florida – Food and Resource Economics, Gainesville, Florida, USA
Dwayne J. Haynes
Affiliation:
University of Florida – Food and Resource Economics, Gainesville, Florida, USA
Troy G. Schmitz
Affiliation:
Arizona State University – Morrison School of Agribusiness and Resource Management, Mesa, Arizona, USA
*
Andrew Schmitz, University of Florida – Food and Resource Economics, 1130A McCarty Hall, Gainesville, Florida 32611, USA, e-mail: aschmitz@ufl.edu
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Abstract

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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

compensationconsumer taxgovernment buyoutquota values
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 4 , Issue 3 , 01 December 2013 , pp. 375 - 389
Copyright
Copyright © Society for Benefit-Cost Analysis 2013

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