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The Effects of Farm Subsidies on Farm Exports in the United States

Author

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  • Lan Anh Tong
  • Cong S Pham
  • Mehmet A Ulubaşoğlu

Abstract

We estimate the elasticity of U.S. farm exports to U.S. farm subsidies using a gravity model of state-level farm exports to 100 major trading destinations for the period 1999 to 2011. Our identification strategy exploits the within-state variation that is free of endogeneity bias in the levels and trends of farm subsidies and farm exports. We find that a 1% decrease in farm subsidies would reduce U.S. farm exports by 0.40% per annum. This equivalently means that the complete abolishment of the farm subsidy program would reduce U.S. farm exports by approximately $15.3 billion per year. Importantly, we document robust evidence that amber box subsidy programs such as counter-cyclical payments and marketing loan gains have the strongest effect on farm exports, while green box subsidy payments, such as direct payments have negligible effects. Finally, subsidy payments affect exports only in agricultural commodities, not in livestock. Our subsidy elasticity estimates are statistically significant, stable, and economically meaningful, and are vitally needed by U.S. and global policymakers in the face of critical domestic and international developments.

Suggested Citation

  • Lan Anh Tong & Cong S Pham & Mehmet A Ulubaşoğlu, 2019. "The Effects of Farm Subsidies on Farm Exports in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(4), pages 1277-1304.
    • Handle: RePEc:oup:ajagec:v:101:y:2019:i:4:p:1277-1304.
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    File URL: http://hdl.handle.net/10.1093/ajae/aay112
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    Citations

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    Cited by:

    1. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    2. Andreas Wagener & Juliane Zenker, 2021. "Decoupled but Not Neutral: The Effects of Counter‐Cyclical Cash Transfers on Investment and Incomes in Rural Thailand†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1637-1660, October.
    3. Kimsanova, Barchynai & Herzfeld, Thomas, 2022. "Policy analysis with Melitz-type gravity model: Evidence from Kyrgyzstan," Journal of Asian Economics, Elsevier, vol. 80(C).
    4. K. N. Harilal, 2021. "Globalization of Agriculture and Atomization of Farming: Small Farms Crisis in Asia," Millennial Asia, , vol. 12(3), pages 298-315, December.
    5. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    6. Veysel Avsar & Gultekin Gollu & Nurgul Sevinc, 2022. "Strict trade measures, flexible financing," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1431-1452, April.
    7. Svetlana Ledyaeva, 2024. "Third-Country Effects of Export Incentives," Open Economies Review, Springer, vol. 35(1), pages 71-98, February.
    8. Kondaridze, Magdana & Luckstead, Jeff, 2023. "Production Subsidies and Agricultural Trade," 2023 Annual Meeting, July 23-25, Washington D.C. 335726, Agricultural and Applied Economics Association.
    9. Kwame Asiam Addey & William Nganje, 2023. "The role of the U.S. exchange‐rate equity market volatility on agricultural exports and forecasts," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(1), pages 25-47, March.
    10. Magdana Kondaridze & Jeff Luckstead, 2023. "Determinants of dairy‐product trade: Do subsidies matter?," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(3), pages 857-873, September.

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