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The End of the Federal Tobacco Program: Economic Impacts of the Deregulation of U.S. Tobacco Production
Author(s) -
Brown A. Blake,
Rucker Randal R.,
Thurman Walter N.
Publication year - 2007
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1111/j.1467-9353.2007.00378.x
Subject(s) - deregulation , production (economics) , business , tobacco industry , agricultural economics , economics , political science , market economy , macroeconomics , law
In 2004, Congress ended the sixty‐six‐year‐old federal tobacco program, effectively deregulating production and prices. With deregulation came a buyout package, with cigarette manufacturers agreeing to pay more than $3 billion in present value to quota owners and farmers. While the dollar values of compensation payments are known, the effects of the historic legislation on tobacco markets are uncertain. We examine these effects and their welfare consequences. We also consider the appropriateness of the buyout payments under alternative views of economic damages due to the quota system's demise.