Who really benefits from agricultural subsidies evidence from field level data

Document Type:Thesis

Subject Area:Economics

Document 1

With the idea of giving a boost to food security in the United States, the Agricultural Adjustment Act was signed in 1933 to offer farmers subsidies in exchange for limiting their production of particular crops. Aside from that, these subsidies were meant to limit overproduction of crops so that crop processing could increase (Dobbs, 2018). Other than the Agricultural Adjustment Act, Congress enacted many other farm programs including commodity price support, supply regulations, import barrier, and crop insurance (Edwards, 2018). Subsidized American farmers of the 21st century have gleaned, and on average, by 2016, about 8824 dollars subsidy payments are being made to subsidized farm operators which make agricultural subsidies to be among the largest per-capita transfer programs in the United States. Although farm subsidy programs started as motivational equity programs in the United States, they are however considered to be entitlements to farmland farmers (Kirwan & Roberts, 2016).

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In case the farm size decreases to the median level, the incidence level falls by 45 percent to 0. 203 (Kirwan & Roberts, 2016). For the first time in the history of the agricultural subsidies in the United States, this paper focuses on the use of field-level data set by linking subsidies to land parcels to find out who benefits from the state-sponsored subsidies. The purpose of field-level data in explaining subsidy incidence is crucial for various reasons. For instance, the use of field-level data provides the ability to contrast field-level estimates with farm-level estimates from the same farms. In this study, the researcher employed the 2006 and 2007 farmland data. Moreover, in the same second phase, the researcher included some extra questions which were used to elicit information about the rental rates paid as well as the subsidy payments received on the randomly chosen fields.

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The data obtained by Kirwan (2009) was unique since it linked specific cash-rented parcels of land being subsidized with a particular type of crop being produced in that land. Primarily, a particular kind of crop is being targeted each year. For instance, in the year 2006, the target crops were rice and soybeans whereas, in 2007, the target crops were cotton and apples. As a result, this change of funding allowed farmers to continue receiving the subsidies but practice mixed farming without restriction to a particular crop (Dobbs, 2018). For a comprehensive understanding of who really the beneficiaries of agricultural subsidies are, it is necessary for a researcher to understand the relationship existing between landlords and tenants. The tenant-landlord relationship is an important aspect for consideration but yet unexplored factor.

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In the United States, the negotiation of rental contracts are done annually, but the landlord-tenant relationship is long-lived. However, little is known about the tenant-landlord relationship which in return may help to find out the primary beneficiary of the agricultural subsidies in the United States. This is likely to occur because farmers had a better idea of issues like how they are managing the rented land, events which affect it, and the prices of various crop charges in technology and how well they suit the particular field. The bottom-line, the field-level data shows that landlords capture about 20-28 cents of the marginal subsidy dollar. The field-level data from ARMS show that more productive land commands a higher rental rate and receives higher subsidies.

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