The Efficiency of Direct Payments versus Tax Reductions under Uncertainty
AbstractThis paper analyzes the optimal behavior of farmers in the presence of direct payments and uncertainty. In an empirical analysis for Switzerland, it confirms previously obtained theoretical results and determines the magnitude of the theoretical predicted effects. The results show that direct payments increase agricultural production between 3.7% to 4.8%. Alternatively to direct payments, the production effect of tax reductions is evaluated in order to determine its magnitude. The empirical analysis corroborates the theoretical results of the literature and demonstrates that tax reductions are also distorting, but to a substantially lesser degree if losses are not offset. However, tax reductions, independently whether losses are offset or not, lead to higher government spending than pure direct payments.
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Bibliographic InfoPaper provided by Department of Economics, University of Girona in its series Working Papers of the Department of Economics, University of Girona with number 8.
Date of creation: Jun 2003
Date of revision:
Uncertainty; Direct Payments; Income Tax; Reductions; Agriculture;
Other versions of this item:
- Renan-Ulrich Goetz & Alois Keusch & Joan Ribas-Tur, 2005. "The Efficiency of Direct Payments versus Tax Reductions under Uncertainty," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(I), pages 115-127, March.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
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