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The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates

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  • Barrett E. Kirwan

Abstract

Who benefits from agricultural subsidies is an open question. Economic theory predicts that the entire subsidy incidence should be on the farmland owners. Using a complementary set of policy quasi experiments, I find that farmers who rent the land they cultivate capture 75 percent of the subsidy, leaving just 25 percent for landowners. This finding contradicts the prediction from neoclassical models. The standard prediction may not hold because of less than perfect competition in the farmland rental market; the share captured by landowners increases with local measures of competitiveness in the farmland rental market. (c) 2009 by The University of Chicago. All rights reserved.

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  • Barrett E. Kirwan, 2009. "The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 138-164, February.
  • Handle: RePEc:ucp:jpolec:v:117:y:2009:i:1:p:138-164
    DOI: 10.1086/598688
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    1. Orden, David & Paarlberg, Robert & Roe, Terry, 1999. "Policy Reform in American Agriculture," University of Chicago Press Economics Books, University of Chicago Press, number 9780226632643, Febrero.
    2. John Rosine & Peter Helmberger, 1974. "A Neoclassical Analysis of the U. S. Farm Sector, 1948–1970," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(4), pages 717-729.
    3. Russell L. Lamb & Jason Henderson, 2000. "FAIR Act Implications for Land Values in the Corn Belt," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 22(1), pages 102-119.
    4. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
    5. H. Peyton Young & Mary A. Burke, 2001. "Competition and Custom in Economic Contracts: A Case Study of Illinois Agriculture," American Economic Review, American Economic Association, vol. 91(3), pages 559-573, June.
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