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

Published online by Cambridge University Press:  15 September 2016

Janet G. Peckham  and
Jaclyn D. Kropp
Janet G. Peckham
Affiliation:
John E. Walker Department of Economics at Clemson University
Jaclyn D. Kropp
Affiliation:
Food and Resource Economics Department at the University of Florida
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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

decoupled paymentsexpectationsinput useproduction decisionsupdating
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 41 , Issue 2 , August 2012 , pp. 158 - 174
Copyright
Copyright © 2012 Northeastern Agricultural and Resource Economics Association 

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