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Licensed Unlicensed Requires Authentication Published by De Gruyter December 10, 2007

Estimating the Welfare Effects of U.S. Distortions in the Ethanol Market Using a Partial Equilibrium Trade Model

  • Ariadna Martinez-Gonzalez , Ian M Sheldon and Stanley Thompson

In this paper the impact of distortions on U.S. imports of ethanol from Brazil are calculated. This is achieved by using two-stage least squares to estimate a partial equilibrium trade model based on annual data from 1975 to 2006. From this the derived export supply and import demand elasticities are used to derive "back-of-the-envelope" measures of the static and cumulative deadweight losses, assuming the distortions are not eliminated. The results presented support the hypothesis that the U.S. and Brazil would reap gains from trade if distortions in the U.S. ethanol market were eliminated.

Published Online: 2007-12-10

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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