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Decoupling farm policies: how does this affect production?

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

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.

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File URL: http://purl.umn.edu/19194
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19194.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19194
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  1. 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).
  2. 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.
  3. Guyomard & Baudry & Carpentier, 1996. "Estimating crop supply response in the presence of farm programmes : application to the CAP," Working Papers 153134, Institut National de la Recherche Agronomique, France.
  4. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
  5. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  6. 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.
  7. Bar-Shira, Z. & Just, R. E. & Zilberman, D., 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, Blackwell, vol. 17(2-3), pages 211-222, December.
  8. Chambers, Robert G., 1995. "The incidence of agricultural policies," Journal of Public Economics, Elsevier, vol. 57(2), pages 317-335, June.
  9. Gardner, Bruce L, 1992. "Changing Economic Perspectives on the Farm Problem," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 62-101, March.
  10. Just, Richard E & Zilberman, David, 1986. "Does the Law of Supply Hold under Uncertainty?," Economic Journal, Royal Economic Society, vol. 96(382), pages 514-24, June.
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