Title

A Welfare Analysis of the U.S. Ethanol Subsidy

Campus Units

Finance, Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

Winter 2009

Journal or Book Title

Review of Agricultural Economics

Volume

31

Issue

4

First Page or Article ID Number

669

Last Page

676

DOI

10.1111/j.1467-9353.2009.01460.x

Abstract

Based on a transparent analytical model of multiple markets including corn, ethanol, gasoline, and transportation fuel, this study estimates the welfare changes for consumers and producers resulting from ethanol production and related support polices in 2007. The welfare estimation takes into account the second-best gain from eliminating loan deficiency payments. The results suggest the total social cost is about $0.78 billion for given market parameters. We validate the model's underlying assumption and test for the results' sensitivity to assumed parameters.

Comments

This working paper was published as Du, Xiaodong, Dermot J. Hayes and Mindy L. Mallory, " Applied Economic Perspectives and Policy 31 (2009): 669–676, doi:10.1111/j.1467-9353.2009.01460.x.