Determining the Welfare Effects of Sugar Beet Mechanization

Abstract

Sugar beet is a by-product of industrial agriculture which plays an important role in providing the required domestic sugar. Given the high proportion of imported sugar in sugar consumption, one way to provide the required sugar is to use a support tool. One of these tools is mechanization. In order to assess the impact of mechanization on the welfare of producers and consumers, supply and demand equations for sugar beet for the period 1971-2012 are developed using two-stage least squares (2SLS). The effect of mechanization on welfare and the welfare of producers’ and consumers’ communities is then analysed in three scenarios: 1%, 4% and 10% reduction in price. The results show that price elasticity of demand is -0.02 and price elasticity of supply 0.013. Additionally, in all scenarios, according to the proportion of total consumer welfare surplus in total social welfare surplus, implementation of this policy is supported by consumers.