Who Did the Ethanol Tax Credit Benefit? An Event Analysis of Subsidy Incidence
Using commodity futures contract and spot prices, we estimate the incidence of the US ethanol subsidy accruing to corn farmers, ethanol producers, gasoline blenders, and gasoline consumers at expiration in 2011. We find compelling evidence that ethanol producers captured two-thirds of the subsidy, and suggestive evidence that a small portion of this benefit accrued to corn farmers. The remaining one-third appears to have been captured by blenders, as we find no evidence that oil refiners or gasoline consumers captured any part of the subsidy. This paper contributes to understanding of biofuels markets and policy and empirical estimation of economic incidence.
The research described in this paper was supported in part by the Bipartisan Policy Center. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
David A. Bielen & Richard G. Newell & William A. Pizer, 2018. "Who did the ethanol tax credit benefit? An event analysis of subsidy incidence," Journal of Public Economics, vol 161, pages 1-14. citation courtesy of