Agricultural Policies

Newspaper

Are “Decoupled" Farm Program Payments Really Decoupled? An Empirical Evaluation

American Journal of Agricultural Economics, vol. 88, pages 73-89 (2006)

This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits, particularly the Agricultural Market Transition Act (AMTA) and market loss assistance payments, bring about distortions in production. The issue is important in light of the upcoming WTO negotiations and debate over the distortionary effects of such decoupled (\green-box") payments. We consider a variety of empirical models intended to evaluate various aspects of the distortion question. Our results generally suggest that the distortions brought about by AMTA payments, though statistically significant, are quite modest. However, market loss assistance payments do bring about larger statistically significant effects and may have resulted in more production of corn. Models of land idling suggest that AMTA payments may decrease idling, though the effects are again relatively modest. Probit models of the land acquisition decision suggest that AMTA payments do not influence the likelihood that agents will acquire more land. Our results are reinforced using an aggregate county level acreage model.

You can also read linked documents for this article.