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The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States
Author(s) -
McDonald Jeffrey D.,
Sumner Daniel A.
Publication year - 2003
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 - 10.1111/1467-8276.00493
Subject(s) - commodity , incentive , price support , economics , farm programs , government (linguistics) , microeconomics , econometrics , agricultural economics , production (economics) , market economy , linguistics , philosophy
Farm programs influence the parameters of typically estimated supply functions. We develop and apply an approach that uses detailed information about farm program incentives and constraints to identify underlying structural acreage response parameters when the data reflect behavior under complex government commodity programs. We illustrate the approach with data on rice acreage response to market price in the United States. For U.S. rice, estimates that fail to appropriately incorporate the program rules under which market data were generated are three to four times smaller than the structural parameters that are useful for most policy analysis or projections under alternative policies.