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

Abstract

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 approximately $8.5 million or 1.7% of the value of production. Meanwhile, the net gains from trade remain on the order of $14 million.