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How much Do Decoupled Payments Affect Production? An Instrumental Variable Approach with Panel Data

  • Jeremy G. Weber
  • Nigel Key

How much decoupled payments, such as direct payments in the U.S., affect agricultural production remains an open empirical question with implications for policy. Using data from multiple years of the Census of Agriculture, we exploit a provision of the 2002 Farm Act that departed from previous policy by making oilseeds eligible for direct payments, thus increasing payments to areas that historically produced more oilseeds. Our instrumental variable estimates, in contrast to OLS estimates, suggest that changes in payments over the period 2002 to 2007 had little effect on aggregate production at the ZIP-code level. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ajae/aar134
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 94 (2012)
Issue (Month): 1 ()
Pages: 52-66

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Handle: RePEc:oup:ajagec:v:94:y:2012:i:1:p:52-66
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  1. C. Edwin Young & Paul C. Westcott, 2000. "How Decoupled Is U.S. Agricultural Support for Major Crops?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 762-767.
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