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Productive and Predatory Public Policies: Research Expenditures and Producer Subsidies in Agriculture
Author(s) -
Gorter Harry,
Nielson David J.,
Rausser Gordon C.
Publication year - 1992
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1242987
Subject(s) - subsidy , economics , public economics , welfare , policy mix , production (economics) , agriculture , distribution (mathematics) , preference , public policy , politics , microeconomics , market economy , macroeconomics , economic growth , ecology , mathematical analysis , mathematics , biology , law , political science
Governments are postulated to maximize a political preference function in choosing two policy instruments: research expenditures (a productive policy) that improve social welfare and production subsidies (a predatory policy) that incur deadweight losses. Each policy affects the distribution of income between producers and consumers. Governments determine the optimal mix of policies, taking into account interaction effects between research and subsidy expenditures. In addition to providing an explanation for underinvestment in research, the paper determines conditions under which research and subsidy policies are complementary. Such conditions are shown to characterize U.S. agriculture. Underinvestment in research is therefore less severe than in some other countries.