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Effects of Decoupling on the Average and the Variability of Output

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  • Serra, Teresa
  • Zilberman, David
  • Goodwin, Barry K.
  • Featherstone, Allen M.

Abstract

Previous research has ignored the influence of inputs on output risk when assessing the effects of decoupled income-support payments on production decisions. This paper studies the impacts of agricultural policy decoupling on output variability and mean by explicitly considering the influence of agricultural input use on the stochastic component of production. We develop a theoretical framework that studies production responses of agricultural producers to apparently decoupled payments. Results show that, under DARA preferences, government transfers will have the effect of increasing production risk. Inferences on the effects of payments on output mean are also made. In our empirical application we use farm-level data collected in Kansas to illustrate the model.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24601.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24601

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Related research

Keywords: decoupling; output risk; risk preferences; Just-Pope production function; Demand and Price Analysis; Q12; Q18;

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References

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  1. Hurd, Brian H., 1994. "Yield Response And Production Risk: An Analysis Of Integrated Pest Management In Cotton," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
  2. Farnsworth, Richard L. & Moffitt, L. Joe, 1981. "Cotton Production Under Risk: An Analysis Of Input Effects On Yield Variability And Factor Demand," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 6(02), December.
  3. Alfons Oude Lansink & Alain Carpentier, 2001. "Damage Control Productivity: An Input Damage Abatement Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(3), pages 11-22.
  4. Just, Richard E & Zilberman, David, 1986. "Does the Law of Supply Hold under Uncertainty?," Economic Journal, Royal Economic Society, vol. 96(382), pages 514-24, June.
  5. Alain Carpentier & Robert D. Weaver, 1997. "Damage Control Productivity: Why Econometrics Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 47-61.
  6. Guyomard, Herve & Baudry, Marc & Carpentier, Alain, 1996. "Estimating Crop Supply Response in the Presence of Farm Programmes: Application to the CAP," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 23(4), pages 401-20.
  7. Teresa Serra & David Zilberman & Barry K. Goodwin & Keijo Hyvonen, 2005. "Replacement of Agricultural Price Supports by Area Payments in the European Union and the Effects on Pesticide Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 870-884.
  8. J. K. Horowitz & E. Lichtenberg, 1994. "Risk-Reducing And Risk-Increasing Effects Of Pesticides," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(1), pages 82-89.
  9. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  10. Bar-Shira, Z. & Just, R. E. & Zilberman, D., 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, Blackwell, vol. 17(2-3), pages 211-222, December.
  11. Sckokai, Paolo & Moro, Daniele, 2002. "Modelling The Cap Arable Crop Regime Under Uncertainty," 2002 Annual meeting, July 28-31, Long Beach, CA 19860, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  12. Bar-Shira, Z. & Just, R.E. & Zilberman, D., 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 17(2-3), December.
  13. Chambers, Robert G., 1995. "The incidence of agricultural policies," Journal of Public Economics, Elsevier, vol. 57(2), pages 317-335, June.
  14. Just, Richard E & Zilberman, David, 1983. "Stochastic Structure, Farm Size and Technology Adoption in Developing Agriculture," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 307-28, July.
  15. Babcock, Bruce A. & Lichtenberg, E. & Zilberman, David, 1992. "Impact of Damage Control and Quality of Output: Estimating Pest Control Effectiveness," Staff General Research Papers 10589, Iowa State University, Department of Economics.
  16. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
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Cited by:
  1. Nancy McCarthy & Gero Carletto & Benjamin Davis & Irini Maltsoglou, 2006. "Assessing the Impact of Massive Out-Migration on Agriculture," Working Papers 06-14, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).

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