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SOME CIRCUMSTANCES IN WHICH PRICE STABILIZATION BY THE WOOL COMMISSION REDUCES INCOMES*

SOME CIRCUMSTANCES IN WHICH PRICE STABILIZATION BY THE WOOL COMMISSION REDUCES INCOMES* Stabilization of wool prices (which is partially achieved by the Wool Commission) may reduce the average annual net income (surplus) of growers and also of manufacturers of wool. The argument that the surplus of growers may be reduced is based upon Massell's extension of Oi's hypothesis. The possibility of falls in the surplus of manufacturers if wool prices are stabilized has a different basis. If wool prices are stabilized by buffer stocks, manufacturers find that their supplies are more variable than in the absence of controls. Consequently, they experience greater average annual cost if their marginal operating costs are increasing. Unless there are substantial revenue gains to processors, their surplus falls. The argument is also applicable to buffer stock schemes for other primary products. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

SOME CIRCUMSTANCES IN WHICH PRICE STABILIZATION BY THE WOOL COMMISSION REDUCES INCOMES*

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References (12)

Publisher
Wiley
Copyright
Copyright © 1972 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1972.tb00093.x
Publisher site
See Article on Publisher Site

Abstract

Stabilization of wool prices (which is partially achieved by the Wool Commission) may reduce the average annual net income (surplus) of growers and also of manufacturers of wool. The argument that the surplus of growers may be reduced is based upon Massell's extension of Oi's hypothesis. The possibility of falls in the surplus of manufacturers if wool prices are stabilized has a different basis. If wool prices are stabilized by buffer stocks, manufacturers find that their supplies are more variable than in the absence of controls. Consequently, they experience greater average annual cost if their marginal operating costs are increasing. Unless there are substantial revenue gains to processors, their surplus falls. The argument is also applicable to buffer stock schemes for other primary products.

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Aug 1, 1972

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