Die Bodenkultur - Journal for Land Management, Food and Environment

K. SALHOFER:

Efficient support policy for a highly-subsidising, and small country The case of the Austrian bread grains market

Summary

Concentrating on the Austrian bread grains market the paper provides helpful insights into the question of efficient policy instrument use for a highly-subsidising, and small country. A surplus transformation curve framework is used to find for the amount transferred to bread grains farmers in 1991 and the used policy instruments (floor price, output control, and CO-responsibility levy) the best policy in terms of Pareto efficiency. It is shown that a superior combination of the used instruments would have decreased the transfer costs by nearly 25% (635 million ATS). In addition, the paper investigates whether alternative policy instruments (deficiency payments, direct income support, and two-price plan) would have improved the transfer efficiency. The study shows that for a small country either a floor price cum output control or a deficiency payments cum output control program - equivalent to a fully decoupled direct income support policy - is the most efficient. Which one is superior depends on the marginal cost of public funds. Key-words: efficient income redistribution, welfare economics, Austrian bread grains market.