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The Dynamic Effects Of Agricultural Subsidies In The United States

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  • de Gorter, Harry
  • Fisher, Eric O'N.

Abstract

This article analyzes the dynamics effects of the farm subsidies in the United States. The subsidies a farmer receives are based upon historical plantings, also called based acreage. It is sometimes optimal for a farmer temporarily not to participate in a program in order to increase future subsidies. The farmer's optimal policy is the solution to a deterministic dynamic program. Farmers with low base acreage opt out of these programs, whereas those with high base acreage participate in them. The article examines aggregate data involving corn, cotton, rice, and wheat during 1987. It shows that these programs increase the output of each of these crops and represent an annual deadweight loss of more than $2 billion.

Suggested Citation

  • de Gorter, Harry & Fisher, Eric O'N., 1993. "The Dynamic Effects Of Agricultural Subsidies In The United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(2), pages 1-13, December.
    • Handle: RePEc:ags:jlaare:30961
    DOI: 10.22004/ag.econ.30961
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    References listed on IDEAS

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    1. Lichtenberg, Erik & Zilberman, David, 1986. "The Welfare Economics of Price Supports in U.S. Agriculture," American Economic Review, American Economic Association, vol. 76(5), pages 1135-1141, December.
    2. Eckstein, Zvi, 1984. "A Rational Expectations Model of Agricultural Supply," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 1-19, February.
    3. Eric O'N. Fisher & Harry de Gorter, 1992. "The International Effects of U.S. Farm Subsidies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 258-267.
    4. de Gorter, Harry & Fisher, Eric O'N., 1989. "The Dynamic Effects Of Agricultural Subsidy Programs In The United States," Working Papers 6875, Cornell University, Department of Applied Economics and Management.
    5. McElroy, Robert & Ali, Mir & Dismukes, Robert & Clauson, Annette, 1989. "Costs of Production for Major U.S. Crops, 1975-87," Staff Reports 278202, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. Meilke, Karl D. & McClatchy, Don & Gorter, Harry de, 1996. "Challenges in quantitative economic analysis in support of multilateral trade negotiations," Agricultural Economics, Blackwell, vol. 14(3), pages 185-200, August.
    2. Gohin, Alexandre & Bureau, Jean-Christophe, 2005. "Sugar Market Liberalization: Modeling the EU Supply of "C" Sugar," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24740, European Association of Agricultural Economists.

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    Keywords

    Agricultural and Food Policy;

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