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.


Issue Date:
1972-08
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/22802
Published in:
Australian Journal of Agricultural Economics, Volume 16, Number 2
Page range:
94-101
Total Pages:
8




 Record created 2017-04-01, last modified 2017-12-06

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