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Flexible public policy: The case of the United States wheat sector |
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| Institution: | 1. LeBow College of Business, Drexel University, 3200 Market Street, Philadelphia, PA 19104, USA;2. IPAG Business School, 184, Boulevard Saint-Germain, 75006 Paris, France;3. Department of Economics and Economic Policies Research Unit (NIPE), University of Minho, Campus of Gualtar, 4710-057 Braga, Portugal;4. London School of Economics and Political Science, LSE Alumni Association, Houghton Street, London WC2 2AE, UK;1. School of Civil Engineering and Mechanics, Huazhong University of Science and Technology, Wuhan, Hubei 430074, China;2. Department of Civil & Environmental Engineering, University of Maryland, College Park, MD 20742-3021, USA;3. School of Civil and Mechanical Engineering, Curtin University, GPO Box U1987, Perth, WA 6845, Australia |
| Abstract: | This paper tests the proposition that flexible policy rules that tie program instrument settings to changes in market conditions can improve economic welfare compared to the prevailing practice in the United States of setting agricultural policy instruments at fixed levels once every 4 years. Flexible policy rules are obtained for the U.S. wheat sector using stochastic control methods. A constraint structure representing producer and consumer behavior and a policy criterion function representing society's weighting of various groups are estimated. It is shown that the flexible policy rules developed in this paper outperform historic policy instrument settings across a wide spectrum of economic conditions. |
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