IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v92y2010i3p836-848.html
   My bibliography  Save this article

The Decoupling of Farm Programs: Revisiting the Wealth Effect

Author

Listed:
  • Fabienne Femenia
  • Alexandre Gohin
  • Alain Carpentier

Abstract

Recent reforms of agricultural policies in developed countries have introduced direct payments as replacements for traditional production-enhancing instruments. Whereas these new instruments can, in principle, influence production through several channels, current empirical studies show no significant impact on production; direct payments mainly increase land values. In this article, we revisit the evaluation of the coupling effects passing through the wealth of agricultural households. The initial wealth of these agents, while mainly being in the form of land asset holding, is always assumed to be fixed. To the contrary, we show theoretically and through an empirical simulation exercise that once the impact of farm programs on initial wealth is properly accounted for, the measure of the coupling effects is not as negligible as found in previous studies. Copyright 2010, Oxford University Press.

Suggested Citation

  • Fabienne Femenia & Alexandre Gohin & Alain Carpentier, 2010. "The Decoupling of Farm Programs: Revisiting the Wealth Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 836-848.
    • Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:836-848
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/ajae/aap029
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bhaskar, Arathi & Beghin, John C., 2007. "Decoupled Farm Payments and the Role of Base Updating Under Uncertainty," Working Papers 7350, Iowa State University, Department of Economics.
    2. Euan Phimister, 1995. "Farm Household Production In The Presence Of Restrictions On Debt: Theory And Policy Implications," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(3), pages 371-380, September.
    3. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2000. "North American Farm Programs and the WTO," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 768-774.
    4. Torre Ugarte, Daniel de la & Sanford, Scott & Skinner, Robert A. & Westcott, Paul C. & Lin, William W., 2000. "Supply Response Under The 1996 Farm Act And Implications For The U.S. Field Crops Sector," Technical Bulletins 33568, United States Department of Agriculture, Economic Research Service.
    5. Bhaskar, Arathi & Beghin, John C., 2009. "How Coupled Are Decoupled Farm Payments? A Review of the Evidence," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), pages 1-24, April.
    6. William Lin & Robert Dismukes, 2007. "Supply Response under Risk: Implications for Counter-Cyclical Payments' Production Impact," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(1), pages 64-86.
    7. Serra, Teresa & Zilberman, David & Gil, Jose Maria, 2008. "Farms' technical inefficiencies in the presence of government programs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(1), pages 1-20.
    8. Teresa Serra & David Zilberman & Barry K. Goodwin & Allen Featherstone, 2006. "Effects of decoupling on the mean and variability of output," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 33(3), pages 269-288, September.
    9. Nancy H. Chau & Harry de Gorter, 2005. "Disentangling the Consequences of Direct Payment Schemes in Agriculture on Fixed Costs, Exit Decisions, and Output," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1174-1181.
    10. Erickson, Kenneth W. & Moss, Charles B. & Mishra, Ashok K., 2004. "Rates of Return in the Farm and Nonfarm Sectors: How Do They Compare?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 789-795, December.
    11. Russell L. Lamb & Jason Henderson, 2000. "FAIR Act Implications for Land Values in the Corn Belt," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 22(1), pages 102-119.
    12. Moledina, Amyaz A. & Roe, Terry L. & Shane, Mathew, 2004. "Measuring Commodity Price Volatility And The Welfare Consequences Of Eliminating Volatility," 2004 Annual meeting, August 1-4, Denver, CO 19963, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. 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.
    14. Thomas W. Hertel, 1989. "Negotiating Reductions in Agricultural Support: Implications of Technology and Factor Mobility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 559-573.
    15. Jean-Paul Chavas & Alban Thomas, 1999. "A Dynamic Analysis of Land Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 772-784.
    16. Chambers, Robert G., 1995. "The incidence of agricultural policies," Journal of Public Economics, Elsevier, vol. 57(2), pages 317-335, June.
    17. Foreman, Linda F., 2006. "Characteristics and Production Costs of U.S. Corn Farms, 2001," Economic Information Bulletin 7205, United States Department of Agriculture, Economic Research Service.
    18. Patricia A. Duffy & C. Robert Taylor & Danny L. Cain & George J. Young, 1994. "The Economic Value of Farm Program Base," Land Economics, University of Wisconsin Press, vol. 70(3), pages 318-329.
    19. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
    20. Anton, Jesus & Mouel, Chantal Le, 2004. "Do counter-cyclical payments in the 2002 US Farm Act create incentives to produce?," Agricultural Economics, Blackwell, vol. 31(2-3), pages 277-284, December.
    21. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economic Reports 33967, United States Department of Agriculture, Economic Research Service.
    22. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
    23. Courleux, Frédéric & Guyomard, Hervé & Levert, Fabrice & Piet, Laurent, 2008. "How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?," Working Papers 211014, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    24. Frédéric Courleux & Herve Guyomard & Fabrice Levert & Laurent Piet & . Inra & . Société Française d'Economie Rurale, 2007. "How the EU single farm payment should be modelled: lump-sum transfers, area payments or… something else ?," Post-Print hal-02282245, HAL.
    25. Barry K. Goodwin & Ashok K. Mishra, 2006. "Are “Decoupled” Farm Program Payments Really Decoupled? An Empirical Evaluation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 73-89.
    26. Paolo Sckokai & Jesús Antón, 2005. "The Degree of Decoupling of Area Payments for Arable Crops in the European Union," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1220-1228.
    27. Anton, Jesus & Giner, Celine, 2005. "Can Risk Reducing Policies Reduce Farmer's Risk and Improve Their Welfare?," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24578, European Association of Agricultural Economists.
    28. Christopher R. McIntosh & Jason F. Shogren & Erik Dohlman, 2007. "Supply Response to Countercyclical Payments and Base Acre Updating under Uncertainty: An Experimental Study," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 1046-1057.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bhaskar, Arathi & Beghin, John C., 2009. "How Coupled Are Decoupled Farm Payments? A Review of the Evidence," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), pages 1-24, April.
    2. Bhaskar, Arathi & Beghin, John C., 2007. "How Coupled are Decoupled Farm Payments? A Review of Coupling Mechanisms and the Evidence," Working Papers 7347, Iowa State University, Department of Economics.
    3. 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.
    4. Robert G. Chambers & Daniel C. Voica, 2017. "“Decoupled” Farm Program Payments are Really Decoupled: The Theory," American Journal of Agricultural Economics, John Wiley & Sons, vol. 99(3), pages 773-782, April.
    5. 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.
    6. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.
    7. Andreas Wagener & Juliane Zenker, 2021. "Decoupled but Not Neutral: The Effects of Counter‐Cyclical Cash Transfers on Investment and Incomes in Rural Thailand†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1637-1660, October.
    8. Urban, Kirsten & Jensen, Hans Grinsted & Brockmeier, Martina, 2012. "How Decoupled is the SFP in GTAP: Using a Sensitivity Analysis to Uncover the Degree of Coupling," Conference papers 332173, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Prifti, Ervin & Daidone, Silvio & Pace, Noemi & Davis, Benjamin, 2019. "Unconditional cash transfers, risk attitudes and modern inputs demand," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 53, pages 100-118.
    10. Voica, Daniel C., 2014. "Are Subsidies Decoupled from Production in the Presence of Incomplete Financial Markets?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169788, Agricultural and Applied Economics Association.
    11. Serra, Teresa & Goodwin, Barry K. & Featherstone, Allen M., 2011. "Risk behavior in the presence of government programs," Journal of Econometrics, Elsevier, vol. 162(1), pages 18-24, May.
    12. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    13. Mary, Sebastien & Santini, Fabien & Boulanger, Pierre, 2013. "An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158860, Agricultural Economics Society.
    14. Cooper, Joseph C., 2008. "A Revenue-Based Alternative to the Counter-Cyclical Payment Program," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6197, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    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. 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), pages 1-20, September.
    17. 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.
    18. Arathi Bhaskar & John C. Beghin, 2010. "Decoupled Farm Payments and the Role of Base Acreage and Yield Updating Under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 849-858.
    19. Mitchell, Paul D. & Rejesus, Roderick M. & Coble, Keith H. & Knight, Thomas O., 2011. "Analyzing Farmer Participation Intentions and Enrollment Rates for the Average Crop Revenue Election (ACRE) Program," Staff Paper Series 560, University of Wisconsin, Agricultural and Applied Economics.
    20. Bhaskar, Arathi & Beghin, John C., 2007. "Decoupled Farm Payments and the Role of Base Updating Under Uncertainty," Working Papers 7350, Iowa State University, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:836-848. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.