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Effects of Decoupling on the Average and the Variability of Output

Author

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

Abstract

Previous research has ignored the influence of inputs on output risk when assessing the effects of decoupled income-support payments on production decisions. This paper studies the impacts of agricultural policy decoupling on output variability and mean by explicitly considering the influence of agricultural input use on the stochastic component of production. We develop a theoretical framework that studies production responses of agricultural producers to apparently decoupled payments. Results show that, under DARA preferences, government transfers will have the effect of increasing production risk. Inferences on the effects of payments on output mean are also made. In our empirical application we use farm-level data collected in Kansas to illustrate the model.

Suggested Citation

  • Serra, Teresa & Zilberman, David & Goodwin, Barry K. & Featherstone, Allen M., 2005. "Effects of Decoupling on the Average and the Variability of Output," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24601, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae05:24601
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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.
    2. Chambers, Robert G., 1995. "The incidence of agricultural policies," Journal of Public Economics, Elsevier, vol. 57(2), pages 317-335, June.
    3. Alfons Oude Lansink & Alain Carpentier, 2001. "Damage Control Productivity: An Input Damage Abatement Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(3), pages 11-22.
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    6. Catalina Carrasco-Tauber & L. Joe Moffitt, 1992. "Damage Control Econometrics: Functional Specification and Pesticide Productivity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(1), pages 158-162.
    7. Teresa Serra & David Zilberman & Barry K. Goodwin & Keijo Hyvonen, 2005. "Replacement of Agricultural Price Supports by Area Payments in the European Union and the Effects on Pesticide Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 870-884.
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    Cited by:

    1. Nancy McCarthy & Gero Carletto & Benjamin Davis & Irini Maltsoglou, 2006. "Assessing the Impact of Massive Out-Migration on Agriculture," Working Papers 06-14, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).

    More about this item

    Keywords

    decoupling; output risk; risk preferences; Just-Pope production function; Demand and Price Analysis; Q12; Q18;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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