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Is There Supply Distortion In The Green Box? An Acreage Response Approach

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  • Bakhshi, Samira
  • Kerr, William A.

Abstract

The shift of the farm subsidies toward programs classified as being decoupled income supports in the WTO’s URAA raises the question of their true impact on production and trade. In this study, we measured the acreage effects of the Canadian whole farm programs under uncertainty. Based on the theoretical discussions regarding the role of the insurance effect in acreage decisions, we extend the theoretical restrictions examined by Chavas and Holt (1990)which enables us to include this effect in our model specification. Hence, we modified the expected utility maximization framework (under the hypothesis that farmers are risk averse) developed by Chavas and Holt (1990) and derived three distinct effects: market effects, the wealth effect, and the insurance effect.

Suggested Citation

  • Bakhshi, Samira & Kerr, William A., 2009. "Is There Supply Distortion In The Green Box? An Acreage Response Approach," Working Papers 51093, Canadian Agricultural Trade Policy Research Network.
  • Handle: RePEc:ags:catpwp:51093
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    File URL: http://purl.umn.edu/51093
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    References listed on IDEAS

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    1. 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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    Cited by:

    1. Burdine, Kenneth H. & Maynard, Leigh J., 2012. "Risk Reduction of LGM-Dairy and its Potential Impact on Production," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124180, Agricultural and Applied Economics Association.
    2. Vyn, Richard J. & Haq, Zahoor Ul & Weerahewa, Jeevika & Meilke, Karl D., 2012. "The Influence of Market Returns and Government Payments on Canadian Farmland Values," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.

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    Keywords

    WTO; decoupled; green box; area; production; Agricultural and Food Policy; Crop Production/Industries; International Relations/Trade; Production Economics;

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