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Decoupled Payments: Household Income Transfers In Contemporary U.S. Agriculture

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  • Anonymous
  • Hopkins, Jeffrey W.

Abstract

Decoupled payments are lump-sum income transfers to farm operators that do not depend on current production, factor use, or commodity prices. Such payments are not currently constrained by global trade rules, but many countries argue that they distort production and trade and that their use should be limited. This report examines the U.S. experience with decoupled payments in its Production Flexibility Contracts program under the Federal Agriculture Improvement and Reform (FAIR) Act of 1996. The payments have improved the well-being of recipient farm households, enabling them to comfortably increase spending, savings, investments, and leisure but with minimal distortion of U.S. agricultural production and trade. However, farm operators may retain as little as 40 percent of program benefits due to higher land rents. While commercial farms received the largest share of decoupled payments, they rent in over two-thirds of their program acres, which suggests that a sizable portion of their program benefits may be passed through to nonfarming landowners.

Suggested Citation

  • Anonymous & Hopkins, Jeffrey W., 2003. "Decoupled Payments: Household Income Transfers In Contemporary U.S. Agriculture," Agricultural Economics Reports 34057, United States Department of Agriculture, Economic Research Service.
  • Handle: RePEc:ags:uerser:34057
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    Cited by:

    1. Pavel Ciaian & d’Artis Kancs & Johan Swinnen, 2010. "EU Land Markets and the Common Agricultural Policy," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(3), pages 1-31.
    2. Whitaker, James B. & Effland, Anne, 2009. "Income Stabilization Through Government Payments: How Is Farm Household Consumption Affected?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(1), April.
    3. Balkhausen, Oliver & Banse, Martin & Grethe, Harald & Nolte, Stephan, 2005. "Modellierung der Auswirkungen einer Entkopplung der Direktzahlungen in der EU auf die Flächenallokation und Wiederkäuerproduktion: Eine Analyse unterschiedlicher Modellergebnisse," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(8).
    4. Erjavec, E. & Salputra, Guna, 2011. "Could The Radical Changes Of Direct Payments Policy Destroy Agricultural Markets In The Eu New Member States?," Economics of Agriculture, Institute of Agricultural Economics, vol. 58(1).
    5. Thia C. Hennessy & Tahir Rehman, 2008. "Assessing the Impact of the 'Decoupling' Reform of the Common Agricultural Policy on Irish Farmers' Off-farm Labour Market Participation Decisions," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 41-56, February.
    6. Daniel May, 2011. "Agricultural trade liberalization under bilateralism: an international network perspective," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(1), pages 23-34, April.
    7. Donnellan, Trevor & Hennessy, Thia, 2012. "Defining a theoretical model of farm households’ labour allocation decisions," Factor Markets Working Papers 140, Centre for European Policy Studies.
    8. Devadoss, Stephen & Gibson, Mark J. & Luckstead, Jeff, 2016. "The Impact of Agricultural Subsidies on the Corn Market with Farm Heterogeneity and Endogenous Entry and Exit," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), September.
    9. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    10. Happe, Kathrin & Balmann, Alfons & Kellermann, Konrad & Sahrbacher, Christoph, 2008. "Does structure matter? The impact of switching the agricultural policy regime on farm structures," Journal of Economic Behavior & Organization, Elsevier, vol. 67(2), pages 431-444, August.
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    12. D'Antoni, Jeremy M. & Mishra, Ashok K. & Joo, Hyunjeong, 2012. "Welfare Implications of a Reduction in Government Payments: The Role of Fringe Benefits," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124766, Agricultural and Applied Economics Association.
    13. Tabeau, Andrzej & van Leeuwen, Myrna, 2005. "Consequences of 2003 CAP Reform for Dutch Agriculture," 89th Seminar, February 2-5, 2005, Parma, Italy 239279, European Association of Agricultural Economists.
    14. Yang Zou & Qingbin Wang, 2012. "Impacts of direct government payments on US agriculture: evidence from 1960-2010 data," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(2), pages 188-199, May.
    15. Andrius Kazukauskas & Carol Newman & Johannes Sauer, 2014. "The impact of decoupled subsidies on productivity in agriculture: a cross-country analysis using microdata," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 327-336, May.
    16. 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.
    17. Xueqin Zhu & Alfons Oude Lansink, 2010. "Impact of CAP Subsidies on Technical Efficiency of Crop Farms in Germany, the Netherlands and Sweden," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(3), pages 545-564.
    18. D’Antoni, Jeremy M. & Mishra, Ashok K. & Barkley, Andrew P., 2012. "Feast or flee: Government payments and labor migration from U.S. agriculture," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 181-192.
    19. Donnellan, Trevor & Hennessy, Thia C., 2012. "The Labour Allocation Decisions of Farm Households: Defining a theoretical model," Working Papers 137021, Factor Markets, Centre for European Policy Studies.
    20. Mark, Tyler B. & Detre, Joshua & D'Antoni, Jeremy & Mishra, Ashok, 2012. "Factors Influencing Farm Operator Expectations on Future Levels of Government Support," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.

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