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“Decoupled” Farm Program Payments are Really Decoupled: The Theory

Author

Listed:
  • Robert G. Chambers
  • Daniel C. Voica

Abstract

Lump-sum transfers to farmers are commonly believed to affect the production choices of farmers in the presence of risk and uncertainty. This paper shows that if farmers have off-farm investment and employment opportunities, production decisions are decoupled from lump-sum subsidies in the presence of risk and uncertainty. Our results are reconciled with existing results by showing that previously identified production adjustments are portfolio adjustments.

Suggested Citation

  • Robert G. Chambers & Daniel C. Voica, 2017. "“Decoupled” Farm Program Payments are Really Decoupled: The Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(3), pages 773-782.
    • Handle: RePEc:oup:ajagec:v:99:y:2017:i:3:p:773-782.
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    File URL: http://hdl.handle.net/10.1093/ajae/aaw044
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    Citations

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    Cited by:

    1. Basnet, Shyam Kumar & Jansson , Torbjorn & Heckelei, Thomas, 2021. "A Bayesian econometrics and risk programming approach for analysing the impact of decoupled payments in the European Union," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(03), January.
    2. Pavel Ciaian & Edoardo Baldoni & d'Artis Kancs & Dušan Drabik, 2021. "The Capitalization of Agricultural Subsidies into Land Prices," Annual Review of Resource Economics, Annual Reviews, vol. 13(1), pages 17-38, October.
    3. Voica, Daniel C. & Wimmer, Stefan G., 2018. "The Production Effects of Crop Diversification Requirements under the European Union Greening Policy," 2018 Annual Meeting, August 5-7, Washington, D.C. 273874, Agricultural and Applied Economics Association.
    4. Zulauf, Carl & Langemeier, Michael & Schnitkey, Gary, 2022. "U.S. Crop Profitability and Farm Safety Net Payments Since 1975," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2022.
    5. Thompson, Wyatt & Gerlt, Scott & Dewbre, Joe H. & Effland, Anne B., 2020. "Rescuing the Decoupling Literature from Incomparable Chaos," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304366, Agricultural and Applied Economics Association.
    6. Jean Joseph Minviel & Timo Sipiläinen, 2018. "Dynamic stochastic analysis of the farm subsidy-efficiency link: evidence from France," Journal of Productivity Analysis, Springer, vol. 50(1), pages 41-54, October.
    7. Wenmei Liao & Jiawei Wang & Ying Lin & Yao Wang, 2021. "Chronic Illness and Income Diversification in Rural China," IJERPH, MDPI, vol. 18(7), pages 1-15, March.
    8. Marten Graubner, 2018. "Lost in space? The effect of direct payments on land rental prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 45(2), pages 143-171.
    9. Daniel Voica & Stefan Wimmer, 2018. "The Production Effects of Crop Diversification Requirements Under the European Union Greening Policy," Discussion Papers 1802, School of Economics and Finance, Massey University, New Zealand.
    10. Ferreira, Marcelo D P & Feres, Jose, 2018. "The Role of Climate Risk on Land Allocation in Brazilian Amazon," 2018 Annual Meeting, August 5-7, Washington, D.C. 274436, Agricultural and Applied Economics Association.
    11. Stefan Wimmer & Christian Stetter & Jonas Schmitt & Robert Finger, 2024. "Farm‐level responses to weather trends: A structural model," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(3), pages 1241-1273, May.

    More about this item

    Keywords

    Decoupling; uncertainty; producers; portfolio analysis;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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