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Do Direct Payments Distort Producers' Decisions? An Examination of the Farm Security and Rural Investment Act of 2002

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  • Erik J. O'Donoghue
  • James B. Whitaker

Abstract

Do direct payments alter operators' acreage decisions? The authors use an event study with individual-level data in a panel-data setting to examine how an exogenous change in direct payments affects individual farmers' production decisions. They track changes in acreage across time and examine whether an exogenous, government implemented Act that allowed farmers to update base acres altered individual operators' acreage decisions. Results suggest that direct payments do change individual acreage decisions, ranging from approximately 44 to 78 acre increases (9 to 16% changes). Their results have no implications for aggregate production impacts. Copyright 2010, Oxford University Press.

Suggested Citation

  • Erik J. O'Donoghue & James B. Whitaker, 2010. "Do Direct Payments Distort Producers' Decisions? An Examination of the Farm Security and Rural Investment Act of 2002," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 170-193.
  • Handle: RePEc:oup:apecpp:v:32:y:2010:i:1:p:170-193
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    File URL: http://hdl.handle.net/10.1093/aepp/ppp005
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    References listed on IDEAS

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    1. Ribaudo, Marc & Kaplan, Jonathan D. & Christensen, Lee A. & Gollehon, Noel R. & Johansson, Robert C. & Breneman, Vincent E. & Aillery, Marcel P. & Agapoff, Jean & Peters, Mark, 2003. "Manure Management For Water Quality Costs To Animal Feeding Operations Of Applying Manure Nutrients To Land," Agricultural Economics Reports 33911, United States Department of Agriculture, Economic Research Service.
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    Cited by:

    1. Ciliberti, Stefano & Frascarelli, Angelo, 0. "A critical assessment of the implementation of CAP 2014- 2020 direct payments in Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 3.
    2. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.
    3. Demirdöğen, Alper & Olhan, Emine & Chavas, Jean-Paul, 2016. "Food vs. fiber: An analysis of agricultural support policy in Turkey," Food Policy, Elsevier, vol. 61(C), pages 1-8.

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