Efficient income redistribution through agricultural import tariffs and deficiency payments
2009
Muto, Y.(Kyoto Univ. (Japan))
In a country with a low comparative advantage in agriculture, the government can use agricultural import tariffs and/or deficiency payments in order to transfer income to agricultural producers by raising agricultural producer prices. However, these policy measures generally exacerbate consumers' and/or taxpayers' welfare, thereby yielding deadweight losses in the economy. This paper defines efficient income redistribution policy for such a country as the combination of agricultural import tariff and deficiency payment that minimizes the deadweight loss associated with a given income transfer to agricultural producers. The paper analyzes what combination of agricultural import tariff and deficiency payment constitutes the efficient income redistribution policy for such a country. In the case of a large agricultural importing country, the income transfer level is shown to significantly affect the combination of agricultural import tariff and deficiency payment that constitutes the efficient income redistribution policy.
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