Processing Industry Capacity and the Welfare Effects of Sugar Policies

18 Pages Posted: 31 Mar 2020

See all articles by Jeffrey C. Williams

Jeffrey C. Williams

University of California, Davis

Brooke A. Isham

affiliation not provided to SSRN

Date Written: May 1999

Abstract

Normally, analysis of policies affecting commodities such as sugar employs long‐run comparative statics under certainty and ignores processing industries like cane‐sugar refining, under the implicit assumption that the capital is malleable in both the short and long run. We present a dynamic model, calibrated to world sugar and solved with numerical dynamic programming, that includes the specific capital of the refining industry. When compared to an otherwise identical static model, the dynamic model suggests that some 20% of welfare losses may be misattributed to cane‐sugar producers instead of refiners. In contrast, the difference between certainty and uncertainty proves to be unimportant.

Keywords: depreciation, dynamic programming, processing industry, short run, sugar policy, Q180

Suggested Citation

Williams, Jeffrey C. and Isham, Brooke A., Processing Industry Capacity and the Welfare Effects of Sugar Policies (May 1999). American Journal of Agricultural Economics, Vol. 81, Issue 2, pp. 424-441, 1999, Available at SSRN: https://ssrn.com/abstract=3564529 or http://dx.doi.org/10.2307/1244592

Jeffrey C. Williams (Contact Author)

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

Brooke A. Isham

affiliation not provided to SSRN

No Address Available

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