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Subsidy Incidence in Agricultural Land Markets: An Experimental Investigation

Author

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  • Nagler, Amy M.
  • Menkhaus, Dale J.
  • Bastian, Christopher T.
  • Ehmke, Mariah D.

Abstract

We use laboratory market experiments to control for market power and social norms in order to evaluate market outcomes associated with subsidy incidence. We estimate the incidence of a stylized agricultural subsidy in laboratory land rental negotiations and compare the market behavior of university students to agricultural professionals. In separate sessions with both subject groups, 21.5 percent of a per-unit subsidy paid to the buyer (tenant) was passed on to sellers (landlords). The consistent treatment effect between students and professionals is encouraging, particularly in the use of experimental laboratory methods for ex ante analyses of agricultural policy impacts.

Suggested Citation

  • Nagler, Amy M. & Menkhaus, Dale J. & Bastian, Christopher T. & Ehmke, Mariah D., 2011. "Subsidy Incidence in Agricultural Land Markets: An Experimental Investigation," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103032, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea11:103032
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    File URL: http://purl.umn.edu/103032
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    Keywords

    agricultural subsidies; ex ante policy analysis; laboratory market experiments; land market; professional versus student subject pools; subsidy incidence; Agricultural and Food Policy; Institutional and Behavioral Economics; Q1; Q18; C92;

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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