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“Decoupled” Farm Program Payments are Really Decoupled: The Theory
Author(s) -
Chambers Robert G.,
Voica Daniel C.
Publication year - 2017
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/aaw044
Subject(s) - subsidy , lump sum , production (economics) , investment (military) , payment , portfolio , investment portfolio , economics , affect (linguistics) , microeconomics , farm programs , business , finance , linguistics , philosophy , politics , political science , law , market economy
Lump‐sum transfers to farmers are commonly believed to affect the production choices of farmers in the presence of risk and uncertainty. This paper shows that if farmers have off‐farm investment and employment opportunities, production decisions are decoupled from lump‐sum subsidies in the presence of risk and uncertainty. Our results are reconciled with existing results by showing that previously identified production adjustments are portfolio adjustments.