CASE STUDY:- EXPORT DUTY ON AGRICULTURE IN ARGENTINA

(submitted by Ankur Gupta and Pradeep Yadav)

 CASE STUDY:- EXPORT DUTY ON AGRICULTURE IN ARGENTINA
(Case 1 : Export Duty)
Surplus Before Export After Change
Duty Export
Duty
Consumer ADPw AIP1 (+) PwDIP1
Producer PwGC P1JC (-)PwGJP1
Govt. 0 EFJI (+) EFJI
Societal (-)
Gain/Loss (DEI+FGJ)

a) Price of agricultural products in Argentina will come down from Pw to P1.

b) There is reduction in Quantity producer will produce from Q1 to Q2 and so the employment will also come down.
c) Government will gain additional revenue as shown in Figure-1 by area EFJI. And money in hands of
government will be used in many important functions such as defence, law and order and possess more collective
value than money possessed by individual.
d) Dead Weight Loss is DEI+FGJ and due to dead weight loss nobody gets benefit from it, so there is efficiency loss resulting from
government interference with the market.
 CASE STUDY:- EXPORT DUTY ON AGRICULTURE IN ARGENTINA
(Case 2:Sales Tax)
Surplus Before After Sales Change
Sales Tax
Tax
Consumer ADPw ADPw 0

Producer PwGC PwFM (-) MFGC

Govt. 0 MFJC (+)MFJC

Societal (-) FGJ
Gain/Loss

a) Price of agricultural products will remain at Pw.

b) Reduction in Producer’s produce from Q1 to Q2 and so the unemployment will go up.
c) Government will gain revenue equivalent to MFJC.
d) Dead weight loss is FGJ and results in loss of efficiency due to interference from government.
The net effect is net loss to the society. But money gained by government due to imposition of sales tax will be better
used in many important functions such as defence, law and order and possess more collective value than money
possessed by individual.