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Who Really Benefits from Agricultural Subsidies? Evidence from Field-Level Data

  • Kirwan, Barrett E.
  • Roberts, Michael J.

The idea that agricultural subsidies are fully capitalized into farmland values forms the foundation of the argument that subsidies are entitlements and removing them would drastically reduce farmland asset values. Surprisingly little evidence substantiates this claim. Using field-level data and explicitly controlling for potentially confounding variables we find that landlords only capture between 14 – 24 cents of the marginal subsidy dollar. The duration of the rental arrangement has a substantial effect on the incidence. Initially, landlords extract 44 cents of the marginal subsidy dollar, but the incidence falls by 1.5 cents with each additional year of the rental arrangement. This duration effect reveals that rental market frictions play an important role in the farmland rental market.

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Paper provided by Agricultural and Applied Economics Association in its series 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado with number 62028.

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Date of creation: 2010
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Handle: RePEc:ags:aaea10:62028
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