Decoupled Direct Payments under Base Acreage and Yield Updating Uncertainty: An Investigation of Agricultural Chemical Use

Janet G. Peckham and Jaclyn D. Kropp

Agricultural and Resource Economics Review, 2012, vol. 41, issue 2, 17

Abstract: We analyze the impacts of agricultural subsidies on farm-level production decisions and input use under price, yield, and policy uncertainty for a risk-averse farmer. Using U.S. farm-level data and weighted ordinary least squares, we find that decoupled payments had little impact on agricultural chemical expenditures (our proxy for use) when the payments were first introduced in 1996. However, after 2004 there is a positive, significant relationship between decoupled payments and agricultural chemical expenditures. The results suggest that updating, introduced in 2002, and expectations of future updating caused decoupled payments to become coupled to current input use and, ultimately, production.

Keywords: Agricultural and Food Policy; Crop Production/Industries; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:arerjl:132527

DOI: 10.22004/ag.econ.132527

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