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

Published online by Cambridge University Press:  28 April 2015

A. Blake Brown  and
Laura L. Martin
A. Blake Brown
Affiliation:
Department of Agricultural and Resource Economics, North Carolina State University
Laura L. Martin
Affiliation:
Department of Agricultural Economics, Michigan State University
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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.

Keywords

flue-curedpolicyprice reductionquotatobacco
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 28 , Issue 2 , December 1996 , pp. 445 - 452
Copyright
Copyright © Southern Agricultural Economics Association 1996

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