Payment Limitations and Acreage Decisions under Risk Aversion: A Simulation Approach

Barry K. Goodwin

American Journal of Agricultural Economics, 2009, vol. 91, issue 1, pages 19-41

Abstract: Payment limits have played an important role in U.S. farm policy deliberations for the last thirty years. Current limits are largely nonbinding. Proposals to strengthen and enforce limits are currently in discussion. We evaluate the likely effects of such proposals on acreage for corn, soybeans, wheat, cotton, and rice in several important producing states. Our results generally indicate that payment limits are unlikely to significantly affect acreage in most cases; exceptions occur for cotton and rice, where the probability that limits would be binding is much greater and thus more likely to affect production. Copyright Copyright 2008 Agricultural and Applied Economics Association.

Date: 2009
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American Journal of Agricultural Economics is edited by Peter Berck, Robert J. Myers, Ian M. Sheldon and B. Wade Brorsen

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