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Financial Impacts of Government Support Price Programs
Author(s) -
Boehlje Michael,
Griffin Steven
Publication year - 1979
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 - 10.2307/1239733
Subject(s) - capitalization , equity (law) , cash flow , differential (mechanical device) , business , index (typography) , price support , discounted cash flow , economics , government (linguistics) , equity ratio , finance , natural resource economics , agricultural economics , production (economics) , monetary economics , return on equity , profitability index , microeconomics , philosophy , linguistics , engineering , world wide web , political science , computer science , law , aerospace engineering
Abstract Recent proposals to index government support prices based on the cost of production will have significant differential impacts on farms with different size and financial characteristics. Simulation analyses indicate that since such proposals result in both increased income and decreased risk and thus capitalization rates, land values could increase dramatically with the larger, high‐equity operator best able to pay the higher price for additional land. Furthermore, the guaranteed cash flow from such a program enables the higher equity firm to grow more rapidly in terms of net worth and land ownership as well as exhibit higher levels of family living compared to smaller, highly leveraged firms.