The Efficiency of Direct Payments versus Tax Reductions under Uncertainty

Renan Goetz, Alois Keusch and Joan Ribas-Tur ()

No 8, Working Papers of the Department of Economics, University of Girona from Department of Economics, University of Girona

Abstract: This paper analyzes the optimal behavior of farmers in the presence of direct payments and uncertainty. In an empirical analysis for Switzerland, it confirms previously obtained theoretical results and determines the magnitude of the theoretical predicted effects. The results show that direct payments increase agricultural production between 3.7% to 4.8%. Alternatively to direct payments, the production effect of tax reductions is evaluated in order to determine its magnitude. The empirical analysis corroborates the theoretical results of the literature and demonstrates that tax reductions are also distorting, but to a substantially lesser degree if losses are not offset. However, tax reductions, independently whether losses are offset or not, lead to higher government spending than pure direct payments.

Keywords: Uncertainty; Direct Payments; Income Tax; Reductions; Agriculture (search for similar items in EconPapers)
JEL-codes: D80 H23 Q12 (search for similar items in EconPapers)
Date: 2003-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Efficiency of Direct Payments versus Tax Reductions under Uncertainty (2005)
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