Price-Distorting Compensation Serving the Consumer and Taxpayer Interest

William E. Foster, Gordon C. Rausser
June 1992  [90-GATT 15]

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Suggested citation:

Foster, W. and G. Rausser. 1992. "Price-Distorting Compensation Serving the Consumer and Taxpayer Interest." CARD paper 90-GATT 15. Center for Agricultural and Rural Development, Iowa State University.


In this paper we address a bothersome question for public choice analysis: Why do consumers and taxpayers acquiesce to seemingly inefficient wealth transfers to a relatively small number of producers? The most common and briefest answer given by political economists is that any individual consumer/taxpayer suffers too little in the rent-seeking game to bear the cost of opposing the aggressive political influence of producers who enjoy the concentrated benefits. In this paper we examine an alternative answer lying in the potential benefits that accrue to consumers and taxpayers from price distorting wealth transfers to heterogeneous producers.