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Do Direct Payments Distort Producers' Decisions? An Examination of the Farm Security and Rural Investment Act of 2002

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  • Erik J. O'Donoghue
  • James B. Whitaker

Abstract

Do direct payments alter operators' acreage decisions? The authors use an event study with individual-level data in a panel-data setting to examine how an exogenous change in direct payments affects individual farmers' production decisions. They track changes in acreage across time and examine whether an exogenous, government implemented Act that allowed farmers to update base acres altered individual operators' acreage decisions. Results suggest that direct payments do change individual acreage decisions, ranging from approximately 44 to 78 acre increases (9 to 16% changes). Their results have no implications for aggregate production impacts. Copyright 2010, Oxford University Press.

Suggested Citation

  • Erik J. O'Donoghue & James B. Whitaker, 2010. "Do Direct Payments Distort Producers' Decisions? An Examination of the Farm Security and Rural Investment Act of 2002," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 170-193.
    • Handle: RePEc:oup:apecpp:v:32:y:2010:i:1:p:170-193
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    File URL: http://hdl.handle.net/10.1093/aepp/ppp005
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    Citations

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    Cited by:

    1. Abby Kelly & Kalyn T. Coatney & Xiaofei Li & Keith H. Coble, 2020. "Subsidy Incidence in the Presence of Bertrand Suppliers of Complementary Inputs: A U.S. Agricultural Example," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 479-501, September.
    2. Jan Pokrivčák & Marián Tóth & Pavel Ciaian & Martin Bušík & Andrej Svorenčík, 2020. "Why Cannot Direct Payments Be Capped in Slovakia? A Political Economy Perspective," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(6), pages 625-648.
    3. Ryan, Mary & O’Donoghue, Cathal & Hynes, Stephen & Jin, Yan, 2022. "Understanding planting preferences – A case-study of the afforestation choices of farmers in Ireland," Land Use Policy, Elsevier, vol. 115(C).
    4. Takayama, T. & Hashizume, N. & Nakatani, T., 2018. "The Impact of Direct Payments in Less Favored Areas on Agricultural Land Use and Farm Numbers: An Instrumental Variable Approach with Panel Data," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277294, International Association of Agricultural Economists.
    5. Thompson, Wyatt & Gerlt, Scott & Dewbre, Joe H. & Effland, Anne B., 2020. "Rescuing the Decoupling Literature from Incomparable Chaos," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304366, Agricultural and Applied Economics Association.
    6. Ciliberti, Stefano & Frascarelli, Angelo, 2015. "A critical assessment of the implementation of CAP 2014- 2020 direct payments in Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 4(3), pages 1-17, December.
    7. Jan Pokrivčák & Marián Tóth & Pavel Ciaian & Martin Bušík & Andrej Svorenčík, . "Why Cannot Direct Payments Be Capped in Slovakia? A Political Economy Perspective," Prague Economic Papers, Prague University of Economics and Business, vol. 0.
    8. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.
    9. Demirdöğen, Alper & Olhan, Emine & Chavas, Jean-Paul, 2016. "Food vs. fiber: An analysis of agricultural support policy in Turkey," Food Policy, Elsevier, vol. 61(C), pages 1-8.

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