SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS DECEMBER 1991 EFFECTS OF AN EXPORT SUBSIDY ON THE U.S. COTTON INDUSTRY

Abstract dependent on initial conditions, stochastic elements are also incorporated into the analysis.In this study, the effects of an export subsidy for cotton are analyzed using a linear elasticity model. COMPARATIVE STATICS OF AN The study explicitly addresses the interaction of EXPORT SUBSIDY current domestic policies with the proposed export subsidy. An export subsidy may be a successful The expected changes in the cotton industry due method of reducing the government costs of the to an export subsidy can be described by a series of cotton program. equations in log differential form obtained from total differentiation of the set of equations describing initial industry equilibrium. For the purposes of this Key words: export subsidy, farm programs, cotton study, initial equilibrium can be described succinctly by: Throughout the 1980s, volatile export markets (1) Qd = f(Pd) were a cause for concern for U.S. cotton producers, (2) QX = g(Pd- S) particularly during the 1985-1986 period when (3) Qs = h(Pp