A Welfare Analysis of the Voluntary Corn Diversion Program, 1961 to 1966

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Abstract
The welfare effects of the com diversion program are analyzed. A three‐sector (corn, other crops, and the rest of the economy) supply‐demand model is developed which incorporates substitution in production and consumption between com and other crops. Using observed data as the restricted market equilibrium and parameters derived from previous research, free market equilibrium is estimated. The net welfare costs and income transfers are computed from the two equilibrium points. In general, the net welfare costs are small and the income transfers are substantial. However, the model is quite sensitive to the parameter values.

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