Profitability of incremental expenditure on fibre promotion

• Published in: Australian Journal of Agricultural Economics 1996-12, Vol.40 (3), p.151-174
• Main Authors: Hill, D.J, Piggott, R.R, Griffith, G.R
• Format: Article
• Language: English
• Subjects: Agricultural economics; Apparel wool; Benefit/ cost ratios; cost benefit analysis; Cotton; cross-country impact; Domestic market; domestic markets; econometric models; Econometrics; economic impact; elasticities; Equilibrium displacement model; expenditure; Export market; exports; Man made fibres; Marketing; Non apparel wool; producer profits; profitability; Profits; Promotion elasticities; Structural market model; Supply and demand; supply balance; synthetic fibers; Textiles; wood promotion expenditure; Wool
• ISSN: 0004-9395; 1467-8489
• DOI: 10.1111/j.1467-8489.1996.tb00592.x

In this paper the impact of changes in wool promotion expenditure and changes in expenditure on the promotion of competing fibres are examined using an equilibrium displacement model. The emphasis is on examining impacts on producer profits net of promotion expenditure and on benefit‐cost ratios measuring changes in producer surplus relative to changes in promotion expenditure. It was found, for example, that incremental expenditure on apparel wool promotion on the domestic market is unprofitable but incremental expenditure on promotion of apparel wool on the export market is generally profitable. Further, it was found that increased promotion of cotton and man‐made fibres on the export market, with promotion of apparel wool unchanged, would reduce profits to apparel wool producers. Finally, a case is made for improved data availability in order to allow more comprehensive ex‐ante and ex‐post evaluations of promotion programs, thereby increasing the intensity of scrutiny of promotion programs to a level more in line with that for investment in rural research and development.