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Economic Analysis of the Western Grain Stabilization Program
Author(s) -
Spriggs John
Publication year - 1985
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/j.1744-7976.1985.tb02049.x
Subject(s) - inflation (cosmology) , point (geometry) , actuarial science , economics , mathematics , physics , theoretical physics , geometry
The author gratefully acknowledges the financial assistance provided by the Saskatchewan Wheat Pool. However, the ideas expressed in this paper are those of the author and do not necessarily reflect the views of the Saskatchewan Wheat Pool. Summary On the basis of the assumptions laid out in section 2.2, the current program is projected to pay out over the prospective five‐year simulation period an amount approximately equal to what it takes in. In determining the payouts, the introduction of the new trigger mechanism is expected to make a significant, but not overwhelming contribution. Over the prospective five‐year period, the current program is expected to be actuarially sound. The first proposed change to the current program is the adjustment of income and expenses for inflation. Such a change appears to generate much larger payouts than the current program, and to have a greater stabilization potential than the current program. However, such payouts could not be sustained by the fund as it presently operates, and it is expected that the fund would be rendered actuarially unsound. After five years, the probability of the fund being in a deficit is 93 percent. The point projection of this deficit is about $1 billion. The second proposed change is the reduction in the number of years for averaging, from five down to three. This change appears to generate a slightly larger total payout over the simulation period. In addition, it does not appear to impact significantly on the program's actuarial soundness. The one significant feature of this change is that it appears to diminish the program's stabilization potential. The third proposed change is the incorporation of debt interest as an expense in the determination of payouts. This change appears to generate a modestly higher total payout. Nonetheless, the fund is still expected to be actuarially sound at the end of the period, and the probability of a deficit is only 19 percent. The significant feature of this change is that the stabilization potential of the program would be enhanced.