Measuring the Effects of Decoupled Payments on Indica Rice Production Under the 1996 and 2002 Farm Bills

Anthony Becker () and Rebecca Judge ()
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Anthony Becker: Department of Economics, St. Olaf College
Rebecca Judge: Department of Economics, St. Olaf College

No 201201, Working Papers from St. Olaf College, Department of Economics

Abstract: As a heavily subsidized crop with significant exports, rice bears at least a superficial similarity to upland cotton, which causes some to speculate that current rice policy exposes the U.S. to the same WTO sanctions as were levied in 2005 against U.S. cotton subsidies. This paper examines the impact of decoupled payments on U.S. indica rice production in the southern states of Arkansas, Mississippi, Missouri, Louisiana and Texas, a region chosen because it accounts for nearly all U.S. rice exports to Central and South America. Using Arellano’s and Bond’s generalized method of moments (GMM) estimation technique for dynamic panel models on county-level data, we find that both direct and counter-cyclical payments exert significant, positive effects on acreage planted in indica rice. The estimated acreage price and cost elasticities are statistically significant and are within the ranges of values in previous studies.

Keywords: rice policy; farm commodity programs; acreage response (search for similar items in EconPapers)
JEL-codes: Q12 Q18 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2012-01-28
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