Economic Impacts of Supply Management: Review and Comparison of Alternative Measures of Consumer Welfare Loss

Previous measures of the welfare impacts of supply-restricting marketing boards in Canada were rather simplistic but, in this study, it is shown that the simple measures are a close approximation of the true welfare loss. The empirical results suggest that consumer surplus is a relatively good measure of equivalent or compensating variation – a measure of the true loss in welfare. It is estimated that consumers probably lose between $1.01 and $1.14 for every $1 transferred to producers as a result of marketing boards in poultry products and eggs. Les measures antérieures des incidences, sur le bien-être, des offices de gestion des approvisionnements au Canada étaient plutôt simplistes. Dans la préterite étude, nous démontrons cependant qu'elles représentaient tout de même une excellente approximation de ?effet négatif réel sur le bien-être. Nos résultats empiriques donnent à conclure que le surplus à la consommation est une mesure relativement exacte de la variation équivalente au compensatoire, une mesure de la perte réelle au chapitre du bien-être. On calcule que les consommateurs perdent probablement entre 1, 01 $ et 1, 14 $ pour chaque dollar transféré aux producteurs par suite de ?intervention des offices de commercialisation dans les secteurs des oeufs et de la volaille.     

Consumer Welfare and the Livestock Economy in the United States

This paper analyzes the responsiveness of the U.S. meal and poultry economy to government policies and other exogenous shocks. In particular, it focuses on the measurement of changes to consumer welfare. An explicit econometric model represents the supply of fed beef, non-fed beef, pork, and poultry. The interaction between the livestock and feed grain markets is captured by an econometric model of the supply and demand for corn. Consumers are represented by a complete system of consumer demand equations. The model is used for a partial analysis of the welfare effects of an actual agricultural policy decision – the sale of large quantities of grains to the Soviet Union in the third quarter of 1972. The loss to consumers that is attributable to the increased grain exports did not reach its maximum until the second quarter of 1975. It is estimated that from 1973 to 1975 consumers suffered a reduction of meat consumption that they valued at $4.5 billion (U.S.). Furthermore, the effects of grain exports proved far larger than the losses due to the poor harvests of 1973 and 1974. Finally, attempts to shelter consumers from the effects of the increased corn exports, either by increased beef imports or increased grain price supports, would have had little success in compensating for the welfare loss actually suffered. Ce papier fail ?analvse de la réponse des secleurs de ?économie quant au bétail et à la volatile aux Flats-Unis, leur reponse à la politique gouvernementale et à?aulres coups exterieurs. En particulier, ce papier se concentre sur la mésure des changements au bien-étre des consommateurs. Un modèle économélrique qui est explicite représente ?approvisionnement du boeuf brouiè, du boeuf non-broutè, du pore el de la volatile. Lcar;action réciproque entre le marché de bélail et ie marché de grains est monlré par un modèle economelrique de ?offre et de la demande pour mats. Un système des équations représente la demande des consommateurs. On utilise le modèle pour ohtenir une analyse parlielle des effeis en ce qui concerne le bien-étre des consommateurs par suite ?une décision faite ?une politique agricole – celle de la vente de grandes quantités de grains à?Union soviétique au troisième quartier de ?année 1972. Laperte aux consommateurs qui est imputable aux exportations augmentées de grain n'apas alteinl son maximum jusqu'au deuxième quartier de 1975. On a eslimé que de 1973 à 1975 les consommateurs ont essuyé une réduction de la consommation de viande qu'ils ont evaluée à$4.5 milliard (en dollars des Etats-Unis). En outre, les effeis des exponations de grain se sont révélés bien grands que les effets des moissons maigres de 1973 el 1974. Finalement, des efforts de protéger les consommateurs contre les effets des exportations augmentees de maìs, ou par des importations augmentees de boeufou par augmenter le soutien pour le prix du grain auraient eu peu de succès à remplacer les pertes en fait essuyées.     

Risking Market Integration without Regulatory Integration: The Case of NAFTA and BSE

Under the North American Free Trade Agreement (NAFTA), there has been a dramatic increase in the integration of markets for live cattle and beef products in Canada, Mexico, and the United States. These markets were severely disrupted in 2003 by the confirmation of single cases of bovine spongiform encephalopathy (BSE) in Canada and the United States. The bulk of this disruption could have been avoided if the countries had developed more closely coordinated risk management programs based on the guidance of international standards. The BSE events illustrate that failure to address regulatory integration leaves integrated markets vulnerable to recurring disruptions.     

Trade Bans, Imperfect Competition, and Welfare: BSE and the U.S. Beef Industry

Between May 2003 and July 2005, the U.S. beef industry faced a total ban on Canadian cattle imports following the discovery of BSE in Canada in May 2003 and restrictions on U.S. beef exports following the discovery of BSE in the United States in December 2003. When the United States reopened its border to Canadian cattle in July 2005, shipments were restricted to cattle less than 30 months of age. The total ban on Canadian cattle imports and restrictions on U.S. beef exports overlapped between January 2004 and July 2005. The restrictions on Canadian cattle imports and U.S. beef exports overlapped for some time after July 2005. This paper addresses theoretically and empirically how to disentangle the impact on the U.S. beef industry of the BSE-related beef trade interruptions in the presence of overlaps and imperfect competition. Entre mai 2003 et juillet 2005, l'industrie bovine américaine s'est vue imposer une interdiction d'importer des bovins canadiens à la suite de la découverte d'un cas d'ESB au Canada en mai 2003 ainsi que des restrictions quant aux exportations de bœuf américain à la suite de la découverte d'un cas d'ESB aux États-Unis en décembre 2003. En juillet 2005, les États-Unis ont rouvert leur frontière aux bovins canadiens vivants de moins de 30 mois uniquement. L'interdiction absolue d'importer des bovins canadiens et les restrictions sur les exportations de bœuf américain se sont chevauchées entre janvier 2004 et juillet 2005. Les restrictions sur les importations de bovins canadiens et les exportations de bœuf américain se sont chevauchées pendant quelque temps après juillet 2005. Le présent article s'est penché sur les façons, théoriques et empiriques, de démĉler les répercussions que les interruptions du commerce du bœuf attribuables à l'ESB ont eues sur l'industrie bovine américaine en présence de chevauchements et de concurrence imparfaite.     

War Legacies,Welfare and Livelihoods in Rural Areas: The Case of Kosovo

This article examines the effects of war on livelihood choices and welfare outcomes of rural households in Kosovo using the 2000 Kosovo Living Standards Measurement Survey. We analyse the extent of the legacy of war on livelihood activities and welfare. We first identify livelihood portfolio clusters of households pursuing similar combinations of activities. These clusters are comparable to those described in more qualitative studies in the immediate post‐conflict period. We then examine the determinants of livelihood portfolio choice and the consequences of these for welfare outcomes. Our results provide evidence of a relationship between a household’s experience of war and livelihood choice. We also identify significant selection effects on welfare for three out of four livelihood clusters, highlighting the fact that selecting into a specific livelihood portfolio changes welfare relative to expected levels. Our results show that war not only affects livelihood choices but also changes the returns to these activities.     

CAP Reforms in the 1990s and their Price and Welfare Implications: The Case of Wheat

We use a nonlinear commodity market model to assess, theoretically and empirically, the impacts of recent reforms of the CAP on prices and economic welfare in the EU. The empirical analysis is based on an aggregate structural econometric model of the EU wheat economy and its links to the rest of the world. Instability issues are also investigated. Impacts of CAP reforms on the variance of domestic and world prices are analysed and a Monte Carlo simulation is used to evaluate uncertainty in the model's welfare computations. Recent reforms led to a net welfare gain within the EU during the period 1993–2000. Additional budgetary costs are less than the welfare gains of consumers and producers. Producers gained as lower price support was overcompensated by additional direct payments.     

The Social Welfare Loss from Egg and Poultry Marketing Boards, Revisited

Continuing conflict over supply management warrants another look at its costs. The authors' model combines the traditional welfare triangle with the social welfare loss created when farmers bear the investment risk associated with possible termination of quota protection. The annual net social welfare loss from egg and poultry marketing boards likely exceeds $100 million, with consumers losing more than $500 million. Half the net social welfare loss is the cost of risk bearing. Quota prices imply that farmers expect quota lives to be relatively short. Therefore, changing to short fixed terms might halve the social welfare loss without imposing capital losses on farmers and might facilitate a return to a free market or auctioning new fixed term quotas.     

The Benefits of Farm Animal Welfare Legislation: The Case of the EU Broiler Directive and Truthful Reporting

The EU Broiler Directive came into force in the UK in June 2010 with the aim of setting new minimum standards, monitoring broiler welfare and addressing any welfare problems. A survey questionnaire was used to elicit information from a stratified sample of citizens in England and Wales regarding their willingness to pay for the provisions of the Directive, as an estimate of the consumer surplus associated with the legislation. We also explore the usefulness of Prelec's ( 2004 ) Bayesian Truth Serum (BTS) in promoting respondents’ truthful reporting. A median willingness to pay of £21.50 per household per year (corrected for sample bias and possible ‘yea saying’) was estimated from 665 responses. This provides an estimated benefit of the legislation to citizens of over £503 million per year, equivalent to 5.3% of current consumer expenditure on chicken. This compares to an estimated £22 million per year cost of producers’ compliance and government enforcement associated with the legislation. No statistically significant differences in responses between respondents that did and did not have a BTS incentive to answer questions truthfully were found, which might reflect apparently truthful answers in this case, an insufficiently strong financial incentive or a weakened effect due to an element of disbelief in the BTS amongst the sample. The analysis suggests that the benefits of the Broiler Directive to citizens greatly outweigh the additional costs to producers, making a case for the legislation to be retained.     

Meeting Consumer Demands with Genetics and Market Coordination: The Case of the Leachman Cattle Company

This case considers two major management decisions facing the Leachman Cattle Company, the largest U.S. beef cattle seedstock producer. The first decision relates to continued expansion into international markets. Such expansion has tremendous potential, but also introduces a host of logistical problems and risks. The second decision concerns the development and market integration required to produce a branded beef product based on Piedmontese beef cattle.     

Consumer Interest in Fish Information and Labelling

Abstract

Consumers' cognitive mechanisms and their perception of product properties are markedly affected by information. This paper focuses on consumers' information needs and interests related to fish. The objective is to explore consumers' use of internal and external information sources and their use of information cues with regard to fish. Qualitative exploratory research was performed in May 2004 through focus group discussions in two European countries: Belgium and Spain. Personal sources are found as the most important information sources with regard to fish. Although a majority of consumers use mandatory information cues on fish labels, they express doubts whether information provided on the labels can be trusted. People who are more experienced and have higher familiarity with fish, seem to be more efficient insearching and using information. Instead of providing one message for the consumers, segmentation and targeted information provision is recommended.     

Genetically Modified Foods: Consumer Issues and the Role of Information Asymmetry

Consumer attitudes towards genetically modified foods (GMFs) differ widely, particularly between North America and Europe. Information asymmetry, incomplete information and uncertainty arise as a result of concerns over GMFs. This paper explores the evolution of consumer attitudes towards genetically modijed foods in Europe and in North America and discusses a number of private market and public policy solutions to the problems of imperfect information and uncertainty. The paper concludes with suggestions for further research .     

Measuring Perceived Performance of the Food System and Consumer Food‐Related Welfare

The paper explores the use of multi‐item summated scales for the measurement of the perceived performance of the food system and of an index to measure consumer food‐related welfare. Scales are developed that encompass a range of factors that influence the welfare consumers derive from food, including food safety, convenience, ethical issues, health and nutrition, taste and cost. These scales are applied to a national sample of food consumers in the United States and the United Kingdom. On the basis of the survey results, there is evidence that the scales are both reliable and valid measures of the perceived performance of the food system in both countries. An index of consumer food‐related welfare is developed that weights the various performance measures according to respondents' measure of importance. Survey respondents judge that the food system is not performing particularly well in either country. Although more work is required on the use of summated multi‐item scales for this purpose, the results suggest that this is a potentially useful approach that provides relevant information on the impact of different elements of the food system on consumer welfare.     

中、东部地区基本农田规划管制农户福利损失及区域差异分析

研究目的：比较基本农田保护规划管制给东部和中部地区农户带来的可能福利损失及其差异性。研究方法：期望效用理论和对比分析方法。研究结果：（1)基本农田保护区规划对农民土地发展权及福利会带来一定程度的影响,规划管制给东、中部地区农户带来的福利损失分别为42521元/hm2?a和20309元/hm2?a,经济发达的东部地区农户的福利损失是中部地区的2.09倍。东部地区户均耕地远远小于中部,且东部地区的增量建设用地极为有限,所以东部的土地价值大于中部。（2)中部地区发生占用基本农田建房、建坟、改园、取土、挖塘、闲置等禁止性行为的概率为0.39,而东部地区发生这些禁止性行为的概率仅为0.1,说明在耕地保有目标限制下基本农田保护政策在东部经济发达地区得到较为有效的宣传。（3)以日常管制中发生频率最高的改园、取土、挖塘、闲置荒芜等禁止性活动为依据,中部地区农户的福利损失为3186—5274元/hm2?a,东部地区农户的福利损失为563—11572元/hm2?a,禁止取土行为几乎不会对东部地区农户的福利产生影响。研究结论：经济发展水平不同地区的农户对农田未来用途的预期不同,进而规划管制给他们带来的可能福利损失也有差异,在进行农田保护经济补偿时应区别对待,提高规划管制效率。     

The Economy-Wide Effects of the BSE Crisis: A CGE Analysis

A Computable General Equilibrium (CGE) model of the UK economy is used to investigate the economy-wide effects of the BSE crisis. The impact of two alternative government strategies for dealing with the crisis, support buying and subsidy payments, are compared with the scenario of no government intervention. The results indicate that whilst the macroeconomic consequences of the crisis may be small in percentage terms, substitution and resource re-allocation effects are substantial. In particular, the impact spreads far beyond those directly impacted by the shock with some sectors of the food industry benefiting. Moreover the alternative government strategies have very different macro economic and intersectoral effects. It is argued that the results support the further development of the model and underlying database.     

Labelling Genetically Modified Food: Heterogeneous Consumer Preferences and the Value of Information

One facet of public debate associated with genetically modified (GM) food focuses on labelling policy for products derived from GM processes. This paper reports on the analysis of effects on consumers' choices of pre-packaged sliced bread under different GM food labelling policies. Substantial heterogeneity is found to exist among consumers' tastes for various bread attributes, including the presence/absence of GM ingredients in bread products. A simulation-based bias-adjusted measure is applied to estimate the value of information, as opposed to the value of the presence or absence of GM ingredients, revealed to consumers by different labelling procedures for the GM attribute. The information that is provided in a mandatory labelling context is considerably more valued by consumers than the information provided in a voluntary labelling context. In a final section, estimated consumer benefits from labelling policies are expressed in terms of average market prices for bread products, providing a measure of benefits against which potential cost increases that may be associated with labelling policies may be compared in the context of any future benefit–cost analysis of GM labelling.     

Dynamic Supply Response and Welfare Effects of Technological Change on Perennial Crops: The Case of Cocoa in Malaysia

Modern biotechnology will generate crops with higher yields and enhanced resistance to pests and diseases. In the case of perennial crops, the age composition of the present stand, the farmers' willingness to invest, and the yield profiles of old and new trees determine the speed of adoption of the new technology and the timing of the effects on supply and demand conditions. We adapt conventional welfare measures to account for these factors in the Assessment of research induced supply shifts. The application to cocoa in Malaysia shows that consumers and adopting producers gain and non-adopters lose. Overall, 72% of the welfare gains go to the consumers.     

Welfare Impacts of the Canada-U.S. Softwood Lumber Trade Dispute: Beggar Thy Consumer Trade Policy

The welfare impacts of the 1987–91 Canadian "voluntary" 15% lumber export tax and the current 6.51 % U. S. import duty are analyzed using a simultaneous equations model of the softwood lumber market. The results show that U.S. consumers suffer losses 35% to 45% of those endured by Canadian producers. Canadian national welfare was much higher under the voluntary export tax, indicating the Canadian government erred in unilaterally terminating the agreement. In both instances, the U.S. government pursued policies that benefited domestic producers at the expense of U.S. lumber consumers, with no attempt or discussion of compensation. Thus, this appears to be a case of "beggar thy consumer" trade policy.