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An Allais Measure of Production Sector Waste Due to Quotas

Lilyan E. Fulginiti and Richard K. Perrin
American Journal of Agricultural Economics
Vol. 77, No. 4 (Nov., 1995), pp. 865-874
Stable URL: http://www.jstor.org/stable/1243809
Page Count: 10
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An Allais Measure of Production Sector Waste Due to Quotas
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Abstract

In this paper we adapt a partial equilibrium approach of Allais and Diewert to measure the efficiency loss in the producing sector due to quotas. The measure of waste is the additional profits available by reallocation subject to constraints that the welfare of persons and firms outside the sector is unaffected. It is relevant to a sector which faces fixed prices for some commodities, but endogenous prices for others. Tobacco quotas in the United States are estimated to have caused quota-induced producer sector waste of approximately $95 million per year during 1950-82, or about 3% of the average value of the crop.

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