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Decoupling farm policies: how does this affect production?

Author

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  • Serra, Teresa
  • Zilberman, David
  • Goodwin, Barry K.
  • Featherstone, Allen M.

Abstract

This paper studies the extent to which decoupled income support measures in agriculture can have production implications both at the extensive and intensive margins. We develop a theoretical framework that analyzes production responses of agricultural producers to apparently decoupled payments, by explicitly considering risk attitudes and uncertainty. We use farm-level data collected in Kansas to estimate the model. Technology and risk preference parameters are jointly estimated. Results show that though lump sum payments are not fully decoupled in the presence of risk and uncertainty, their effects on agricultural production are likely to be of a very small magnitude.

Suggested Citation

  • Serra, Teresa & Zilberman, David & Goodwin, Barry K. & Featherstone, Allen M., 2005. "Decoupling farm policies: how does this affect production?," 2005 Annual meeting, July 24-27, Providence, RI 19194, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19194
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    File URL: http://purl.umn.edu/19194
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    References listed on IDEAS

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    1. Newbery, D M G & Stiglitz, J E, 1979. "The Theory of Commodity Price Stabilisation Rules: Welfare Impacts and Supply Responses," Economic Journal, Royal Economic Society, vol. 89(356), pages 799-817, December.
    2. David A. Hennessy, 1998. "The Production Effects of Agricultural Income Support Policies under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
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    6. Murat Isik & Madhu Khanna, 2003. "Stochastic Technology, Risk Preferences, and Adoption of Site-Specific Technologies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 305-317.
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    8. Guyomard, Herve & Baudry, Marc & Carpentier, Alain, 1996. "Estimating Crop Supply Response in the Presence of Farm Programmes: Application to the CAP," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 23(4), pages 401-420.
    9. Sckokai, Paolo & Moro, Daniele, 2002. "Modelling The Cap Arable Crop Regime Under Uncertainty," 2002 Annual meeting, July 28-31, Long Beach, CA 19860, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Howard D. Leathers & John C. Quiggin, 1991. "Interactions between Agricultural and Resource Policy: The Importance of Attitudes toward Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 757-764.
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    12. H. Alan Love & Steven T. Buccola, 1991. "Joint Risk Preference-Technology Estimation with a Primal System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 765-774.
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    Citations

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    Cited by:

    1. Pavel Ciaian & d’Artis Kancs & Johan Swinnen, 2010. "EU Land Markets and the Common Agricultural Policy," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(3), pages 1-31.
    2. Bhaskar, Arathi & Beghin, John C., 2009. "How Coupled Are Decoupled Farm Payments? A Review of the Evidence," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), April.
    3. Renwick, Alan W. & Jansson, Torbjorn & Thomson, Steven & Revoredo-Giha, Cesar & Barnes, Andrew Peter, 2011. "The Economic Impact of allowing Partial Decoupling under the 2003 Common Agricultural Policy reforms on Scottish agriculture," Working Papers 131461, Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group.
    4. repec:oup:revage:v:30:y:2008:i:1:p:27-42. is not listed on IDEAS
    5. Girante, Maria Joana & Goodwin, Barry K. & Featherstone, Allen M., 2009. "Wealth, Debt, Government Payments, and Yield Performance," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49353, Agricultural and Applied Economics Association.
    6. Pavel Ciaian & D'Artis Kancs & Johan Swinnen, 2014. "The Impact of the 2013 Reform of the Common Agricultural Policy on Land Capitalization in the European Union," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(4), pages 643-673.
    7. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    8. Pavel Ciaian & Johan F.M. Swinnen, 2007. "Credit Market Imperfections and the Distribution of Policy Rents: The Common Agricultural Policy in the New EU Member States," LICOS Discussion Papers 18307, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    9. Girante, Maria Joana & Goodwin, Barry K. & Featherstone, Allen M., 2008. "Farmers' Crop Acreage Decisions in the Presence of Credit Constraints: Do Decoupled Payments Matter?," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6335, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Keith H. Coble & J. Corey Miller & M. Darren Hudson, 2008. "Decoupled Farm Payments and Expectations for Base Updating," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 30(1), pages 27-42.

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    Keywords

    Agricultural and Food Policy;

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