The Welfare Cost of Grain Protection in the United Kingdom

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Abstract
The welfare cost of grain protection in the United Kingdom was estimated for the year 1959–60. A production cost only was estimated since the deficiency payments system employed in the United Kingdom ensured that consumer prices were equivalent to free market prices. The production cost was a function of the degree of protection (difference between producer and consumer prices), the elasticity of domestic supply, and the value of domestic production. Both absolute and relative costs of protection were determined. Because of inelastic supply conditions, moderate margins of protection, and the absence of a consumption cost, relative costs of protection ranged from 3 to 10 percent of the change in producers' surplus. The results indicate the influence of a particular method of support for agriculture on the cost of protection.

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