Abstract

Tariffs or Deficieney Payments? A Welfare Costs-Analysis of Austria’s Agricultural Policy

Different political decisions create welfare costs of differing magnitude. This, however, has been frequently neglected by both economists and policymakers. In this article welfare costs of a Deficiencey Payment-system are compared with those arising from a tariff-policy by means of a partial equilibrium model. Three model situations are analyzed theoretically and then applied to Austria’s agriculture. To present the calculated results in a more meaningful context, they are compared with other economic indicators. Producers gain identical transfer incomes under both alternatives. Deficieney Payments cause, however, welfare costs which are approximately half as high as those observed under the tariff policy. In both schemes, the average welfare costs of saving foreign exchange are the same