Trade Gains and Welfare Costs of Income Stabilization Programs for Hog Producers in Quebec

The welfare costs of deficiency payments for an exported commodity may, under certain conditions, outweigh the gains from trade. The potential welfare impacts of stabilization programs in the hog sector in Quebec are estimated, based on a partial equilibrium framework, and elasticity estimates drawn from other sources. The results indicate that the loss in surplus in Quebec as a result of deficiency payments is very modest at approximate] y $8.5 million or 1.7 % of the value of production. Meanwhile, the net gains from trade remain on the order of $14 million. In this paper, the analytical framework de-scribed by Schmitz and Chambers was applied to evaluate the potential welfare effects flow-ing from the current stabilization programs supporting the hog sector in Quebec. The analysis focuses on the domestic impacts of these programs since, as indicated by Schmitz and Chambers, whether or not there are sig-nificant international implications associated with the use of support programs, there may be important domestic welfare costs of which policy makers should be aware