| Publications [#267436] of Steven E. Sexton
Articles
- Saitone, TL; Sexton, RJ; Sexton, SE, Effects of Market Power on the Size and Distribution of Subsidy Benefits: The Case of Ethanol Promotion
(2007)
(last updated on 2023/07/05)
Abstract: The subject of market power is discussed frequently in debates about
subsidies for ethanol production, and structural conditions in the
industry create a prima-facie case for concerns about market power. This
paper develops a prototype model for determining the production and price
impacts and distribution of benefits from the U.S. ethanol subsidy when
upstream sellers in the seed sector and downstream buyers in the
processing sector may exercise market power. The impact of the subsidy is
analyzed within a simulation framework for alternative levels of market
power. Results demonstrate that the impacts on prices and output are
limited for modest departures from competition. Distributional impacts
are much greater. Seed producers and corn processors with market power are
able to capture relatively large shares of the benefits from the subsidy.
A perhaps surprising result is that upstream oligopoly power exercised by
seed producers is prospectively as important in influencing the positive
and distributional impacts of the subsidy as the much more frequently
discussed and debated prospect that downstream corn processors may
exercise buyer power.
|