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Abstract

The purpose of this paper is to quantitatively analyze trade distortion effects of average crop revenue election payment (ACRE) under the 2008 U.S. Farm Bill. A newly developed imperfectly competitive spatial equilibrium model includes the ACRE, in addition to Lerner indices and several kinds of trade policies. The Lerner indices are calibrated with marginal costs by using a new method. The model is applied to international wheat trade. The main results of calibration and policy simulation are as follows. Firstly, the market structure is almost perfectly competitive in developed countries, but imperfectly competitive in developing countries. Secondly, the ACRE will work as an export subsidy. Thirdly, the ACRE will distort international trade remarkably if the participation rate of ACRE increases.

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