Abstract:
Michael Pelcovits (1979, p. 303) recently showed that with an unstable foreign excess supply
curve, either a futed quota or a buffer stock program with a fixed tariff can be used to stabilize
domestic price at a given level, and both policies ‘will have the same effect on social welfare
cso . . . t]he choice between [the two.. .] must then be made on the basis of administrative cost
and feasibility’, However, he reached his conclusion by ranking the two policies on the basis of
domestic welfare, and in this note we demonstrate with his same model that on the basis of
foreign welfare the buffer stock is better than the quota. Thus, wor!ld welfare is higher under the
buffer stock than under the quota.
