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The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates

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  • Kirwan, Barrett E.

Abstract

Each year U.S. farmers receive more subsidies than needy families receive through welfare assistance or post-secondary students receive through student aid grants. Yet, who benefits from agricultural subsidies is an open question. Economic theory predicts the entire subsidy incidence should be on the farmland owners. Since non-farmers own nearly half of all farmland, this implies that a substantial portion of all subsidies accrue to non-farmers while a significant share of all farmers receive no benefits. Using a complementary set of policy quasiexperiments, I find that farmers who rent the land they cultivate capture 75 percent of the subsidy, leaving just 25 percent for landowners. This finding contradicts the prediction from neoclassical models. The standard prediction may not hold due to less than perfect competition in the farmland rental market; the share captured by landowners increases with local measures of competitiveness in the farm land rental market.

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Bibliographic Info

Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 42714.

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Date of creation: 2008
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Handle: RePEc:ags:umdrwp:42714

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Related research

Keywords: Agricultural and Food Policy; Environmental Economics and Policy; Land Economics/Use;

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  1. Who benefits from agricultural subsidies?
    by Economic Logician in Economic Logic on 2009-05-07 00:56:00
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