Journal Article

Agricultural Policies in the Presence of Distorting Taxes

Ian W.H. Parry

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 1, pages 212-230
Published in print February 1999 | ISSN: 0002-9092
Published online February 1999 | e-ISSN: 1467-8276 | DOI:
Agricultural Policies in the Presence of Distorting Taxes

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  • Agricultural Economics
  • Taxation, Subsidies, and Revenue


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This article analyzes how distortionary factor taxes affect the welfare impacts of production subsidies, production quotas, acreage controls, subsidies for acreage reductions, and cash transfers to farmers. Pre-existing taxes substantially raise the costs of all these policies. These additional costs reflect the welfare losses from financing certain policies by distortionary taxes. They also reflect interactions with factor markets caused by changes in the costs of producing agricultural output. Previous studies ignore the latter types of effect. Consequently they significantly overstate the costs of production subsidies and understate the costs of production quotas, acreage controls, and subsidies for acreage reductions.

Keywords: agricultural policies; distortionary taxes; general equilibrium analysis; welfare effects; H220; Q180

Journal Article.  0 words. 

Subjects: Agricultural Economics ; Taxation, Subsidies, and Revenue

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