Incorporating heterogeneity into farm policy analysis
Abstract
In previous farm bills, policymakers recognized that conservation incentives were imperative to offset the erosive effects of increased production encouraged by the traditional commodity programs. The Food and Security Act of 1985 created two major devices to encourage the conservation of soil resources--the Conservation Reserve Program (CRP) and Conservation Compliance (CC). These programs were adopted due to pressure from environmental groups concerned with the extensive soil erosion resulting from the increased production activity of the 1970's. However, the effectiveness and costs of these policies are under increased scrutiny. It has been recognized that conservation programs which idle land are in direct conflict with farm subsidy programs which encourage monocropping and overproduction. In 1990, in an effort to balance costs and environmental considerations, the Acreage Reduction Program (ARP) was modified to permit greater flexibility in choosing rotation schemes while further limiting the number of acres eligible for subsidy payments. Yet, in 1991, $5.8 billion was still paid out in the form of crop price subsidies. During the same year, \$215 million was spent by the Agriculture Stabilization and Conservation Service (ASCS) on various conservation programs in addition to the $1.7 billion spent on the CRP. As preparations for the 1995 farm bill proceed, continued emphasis will be placed on federal budget reduction and environmental improvement. Attention is likely to be focused on the more costly farm programs--the CRP and various cross compliance programs such as Conservation Compliance and the Acreage Reduction Program. This research develops a tool for evaluating agricultural commodity programs and Conservation Compliance targets. It is based on the analysis of a set of representative farms which reflects the diversity of farmer endowments which is the motivation for their behavior in response to program parameters. Thus, it more correctly aggregates individual farmer responses. The tool is then used to examine the effects of alternative levels of the price support program parameters on agricultural production, costs to the government and consequences for the environment.
Degree
Ph.D.
Advisors
Doering, Purdue University.
Subject Area
Agricultural economics
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