Effects of Decoupling on the Average and the Variability of Output

Teresa Serra, David Zilberman (), Barry K. Goodwin and Allen Featherstone ()

No 24601, 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark from European Association of Agricultural Economists

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.

Keywords: decoupling; output risk; risk preferences; Just-Pope production function; Demand and Price Analysis; Q12; Q18 (search for similar items in EconPapers)
Date: 2005
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