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How much Do Decoupled Payments Affect Production? An Instrumental Variable Approach with Panel Data
Author(s) -
Weber Jeremy G.,
Key Nigel
Publication year - 2012
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aar134
Subject(s) - instrumental variable , payment , panel data , direct payments , production (economics) , economics , affect (linguistics) , exploit , variable (mathematics) , econometrics , aggregate data , agriculture , public economics , statistics , macroeconomics , geography , finance , mathematics , mathematical analysis , linguistics , philosophy , computer security , archaeology , computer science
How much decoupled payments, such as direct payments in the U.S., affect agricultural production remains an open empirical question with implications for policy. Using data from multiple years of the Census of Agriculture, we exploit a provision of the 2002 Farm Act that departed from previous policy by making oilseeds eligible for direct payments, thus increasing payments to areas that historically produced more oilseeds. Our instrumental variable estimates, in contrast to OLS estimates, suggest that changes in payments over the period 2002 to 2007 had little effect on aggregate production at the ZIP‐code level.