INTERACTION EFFECTS OF PROMOTION, RESEARCH, AND PRICE SUPPORT PROGRAMS FOR U.S. COTTON

increasing the profitability of all producers in the market.² In addition to the national programs, there are
state-level promotion and research programs for many commodities.

Although producers presumably vote to institute checkoff programs because they anticipate
receiving positive net benefits, it is possible that those benefits will not materialize. Thus, checkoff
program funders retain the right the vote the programs out of existence. For instance, programs for
pecans, limes, and fresh cut flowers and fresh cut greens were voted out of existence in 1993, 1995, and
1997, respectively (USDA AMS, 2001). In addition, the majority of pork producers that participated in
an advisory referendum in 2000 voted to end the $50 million pork checkoff program, although that
program continues to operate under a court settlement, subject to several changes, including a
commitment to a future binding referendum. For producers to make well-informed decisions concerning
their support for the checkoff programs in which they participate, it is important to have accurate
estimates of the net returns.

However, many studies of the effectiveness of checkoff programs do not adequately incorporate
the impacts of existing government policies. In particular, the dampening effect of binding price supports
on the gains to producers from generic promotion and research are not

always accounted for (e.g., Capps et al., 1997; Lenz, Kaiser, and Chung, 1998; Pritchett, Liu, and Kaiser,
1998). However, the pre-existing distortions from government interventions can be quite large.

Therefore, ignoring these distortions may lead to substantially inaccurate estimates of the changes in
welfare associated with generic promotion and research.

In this study, we examine these interaction effects for U.S. cotton, a commodity with a substantial
checkoff program used to expand demand in a market that has recently been subject to large subsidies for
producers as well as consuming textile mills. We develop a model of the U.S. cotton market that captures

²The Secretary of Agriculture is authorized under the Commodity Promotion, Research, and Information Act of 1996 to
issue an order regarding promotion, research, and information activities for an agricultural commodity based on
proposals submitted by industry representatives. To determine whether the persons to be covered by the order are in
favor, the order may provide for an initial referendum of persons subject to the assessment. If there is not an initial
referendum, then a referendum must be held within three years of the starting date of assessments. The order will be
suspended or terminated if it is not favored by persons voting in a referendum (Wright, 1996). All of the Federal

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