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Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma
Food and Resource Economics, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, USA
- 1 Food and Resource Economics, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, USA
- 2
- 3
Theoretical Economics Letters·Volume 03 (2013)·Pages 156–158·Published 7 June 2013·DOI10.4236/tel.2013.33025
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Abstract
In some cases, production quota buyouts can be paid for through consumer taxes. Using a simplified two-period model, we show that producers can never gain from a consumer tax buyout even if the compensation is based on an inflated quota value. The higher the quota value used as the basis of compensation, the greater is the overall producer loss from the buyout. This producer loss within a two-period model buyout is called “negative producer compensation”.
KeywordsConsumer Tax Production Quota BuyoutNegative CompensationTobacco
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