TY - JOUR
T1 - Biofuel subsidies and international trade
AU - Bandyopadhyay, Subhayu
AU - Bhaumik, Sumon
AU - Wall, Howard J.
N1 - This is the pre-peer reviewed version of the following article: Bandyopadhyay, S., Bhaumik, S., & Wall, H. J. (2013). Biofuel subsidies and international trade. Economics and politics, Early view., which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/ecpo.12009/abstract
PY - 2013
Y1 - 2013
N2 - This paper explores optimal biofuel subsidies in a general equilibrium trade model. The focus is on the production of biofuels such as corn-based ethanol, which diverts corn from use as food. In the small-country case, when the tax on crude is not available as a policy option, a second-best biofuel subsidy may or may not be positive. In the large-country case, the twin objectives of pollution reduction and terms-of-trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. Finally, we show that when both nations engage in biofuel policies, the terms-of-trade effects encourage the Nash equilibrium subsidy to be positive (negative) for the food exporting (importing) nation.
AB - This paper explores optimal biofuel subsidies in a general equilibrium trade model. The focus is on the production of biofuels such as corn-based ethanol, which diverts corn from use as food. In the small-country case, when the tax on crude is not available as a policy option, a second-best biofuel subsidy may or may not be positive. In the large-country case, the twin objectives of pollution reduction and terms-of-trade improvement justify a combination of crude tax and biofuel subsidy for the food exporter. Finally, we show that when both nations engage in biofuel policies, the terms-of-trade effects encourage the Nash equilibrium subsidy to be positive (negative) for the food exporting (importing) nation.
UR - http://www.scopus.com/inward/record.url?scp=84878922648&partnerID=8YFLogxK
U2 - 10.1111/ecpo.12009
DO - 10.1111/ecpo.12009
M3 - Article
AN - SCOPUS:84878922648
SN - 0954-1985
VL - 25
SP - 181
EP - 199
JO - Economics and Politics
JF - Economics and Politics
IS - 2
ER -