A Tale of Cyclones, Exports and Surplus Forgone in Australia's Protected Banana Industry

25 Pages Posted: 20 Sep 2018

See all articles by Chia Chiun Ko

Chia Chiun Ko

University of Queensland

Paul Frijters

Queensland University of Technology - School of Economics and Finance

Gigi Foster

UNSW Australia Business School, School of Economics

Date Written: September 2018

Abstract

This paper examines the welfare loss caused by import restrictions on bananas in Australia, which we argue to be a classic rent‐seeking policy. We propose a new micro‐model of agricultural production under uncertainty and production delays and ask whether, due to cyclones and the timing of planting decisions, Australian banana import restrictions have turned into a form of export promotion. We exploit two cyclones as exogenous supply shocks, and use new data to estimate the price elasticity of demand for bananas in Australia to be around −0.5. We estimate the total welfare loss of Australia's banana import restrictions to be over A$150 million per year, implying a yearly subsidy of more than a quarter of a million dollars per banana grower.

Suggested Citation

Ko, Chia Chiun and Frijters, Paul and Foster, Gigi, A Tale of Cyclones, Exports and Surplus Forgone in Australia's Protected Banana Industry (September 2018). Economic Record, Vol. 94, Issue 306, pp. 276-300, 2018. Available at SSRN: https://ssrn.com/abstract=3252058 or http://dx.doi.org/10.1111/1475-4932.12414

Chia Chiun Ko (Contact Author)

University of Queensland

St Lucia
Brisbane, 4072
Australia

Paul Frijters

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
(07) 3864 9364 (Phone)
(07) 3864 1500 (Fax)

HOME PAGE: http://www.bus.qut.edu.au/paulfrijters/index.jsp

Gigi Foster

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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