The Production Effects of Agricultural Income Support Policies Under Uncertainty

12 Pages Posted: 2 Apr 2020

Date Written: February 1998

Abstract

This analysis decomposes the production impacts of income support programs into wealth, insurance, and coupling effects. Under the usual assumptions about preferences, the wealth and insurance effects of many support programs increase optimal input levels even for supposedly decoupled programs. If the program is “coupled” in the usual sense, then all three effects often act in the same direction. It is concluded that studies of trade and domestic policy reform in stochastic environments should consider insurance and wealth effects. The derivative conditions required to obtain results are also subjected to scrutiny. Simulations for an Iowa corn producer confirm the comparative statics.

Keywords: coupling effects, decoupled support, insurance effects, wealth effects, F130, Q180

Suggested Citation

Hennessy, David, The Production Effects of Agricultural Income Support Policies Under Uncertainty (February 1998). American Journal of Agricultural Economics, Vol. 80, Issue 1, pp. 46-57, 1998, Available at SSRN: https://ssrn.com/abstract=3566425 or http://dx.doi.org/10.2307/3180267

David Hennessy (Contact Author)

Iowa State University

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