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Evaluating Policy Design Choices for the Margin Protection Program for Dairy Producers: An Expected Indemnity Approach

John Newton, Cameron S. Thraen and Marin Bozic

Applied Economic Perspectives and Policy, 2016, vol. 38, issue 4, 712-730

Abstract: The Agricultural Act of 2014 replaced dairy product price supports and countercyclical income support payments with the Margin Protection Program for Dairy Producers. Using farm-level data, producer decisions and aggregate policy costs under a variety of risk environments and policy design alternatives are simulated. Fixed premium rates may result in budget outlays that are substantially higher than for equivalent variable-rate insurance subsidized at levels observed in revenue-based crop insurance policies. Due to the absence of adjusted gross income or production eligibility constraints, a significant portion of benefits may accrue to a small share of large dairy farms.

Keywords: Dairy; Margin Protection Program; Agricultural Act of 2014; Monte-Carlo simulations; farm program decisions (search for similar items in EconPapers)
JEL-codes: Q11 Q12 Q13 (search for similar items in EconPapers)
Date: 2016
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Applied Economic Perspectives and Policy is currently edited by Timothy Park, Tomislav Vukina and Ian Sheldon

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