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A tale of cyclones, exports and surplus forgone in Australia's protected banana industry

Ko, Chia Chiun, Frijters, Paul and Foster, Gigi (2018) A tale of cyclones, exports and surplus forgone in Australia's protected banana industry. Economic Record, 94 (306). pp. 276-300. ISSN 0013-0249

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Identification Number: 10.1111/1475-4932.12414

Abstract

This paper examines the welfare loss caused by import restrictions on bananas in Australia, which we argue to be a classic rent‐seeking policy. We propose a new micro‐model of agricultural production under uncertainty and production delays and ask whether, due to cyclones and the timing of planting decisions, Australian banana import restrictions have turned into a form of export promotion. We exploit two cyclones as exogenous supply shocks, and use new data to estimate the price elasticity of demand for bananas in Australia to be around −0.5. We estimate the total welfare loss of Australia's banana import restrictions to be over A$150 million per year, implying a yearly subsidy of more than a quarter of a million dollars per banana grower.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/14754932
Additional Information: © 2018 Economic Society of Australia
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 23 Aug 2018 10:09
Last Modified: 20 Nov 2019 05:44
Projects: DP 150104169
Funders: Australian Research Council
URI: http://eprints.lse.ac.uk/id/eprint/90084

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