The decoupling of farm programs: Revisiting the wealth effect

Fabienne Femenia, Alexandre Gohin and Alain Carpentier

No 48107, 108th Seminar, February 8-9, 2008, Warsaw, Poland from European Association of Agricultural Economists

Abstract: Recent reforms of agricultural policies in developed countries introduced direct payments to the detriment of traditional production enhancing instruments. Whereas these new instruments can influence production through several effects, current empirical studies do not show any significant impact on production; direct payments mainly increase land values. In this article, we revisit the evaluation of the coupling effects passing through the wealth of agricultural households. The initial wealth of these agents, while being mainly in form of land asset holding, is always assumed to be fixed. On the contrary we show theoretically and empirically that, once the impact of farm programs on initial wealth is properly accounted for, the measure of the coupling effects is considerably increased for direct payments and more much marginally for traditional policy instruments. We illustrate the impact of this initial wealth actualisation through a simulation of the suppression of the US corn policy. The impact of this policy was underestimated by two thirds.

Pages: 18
Date: 2008
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: The Decoupling of Farm Programs: Revisiting the Wealth Effect (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa108:48107

DOI: 10.22004/ag.econ.48107

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