Effects of Differing Farm Policies on Farm Structure

Government agricultural programs have a variety of goals, among them is preserving the family farm (U.S. Department of Agriculture 2003, pp. 18–20). While no single program is dedicated to maintaining a certain type of farm structure, program features are sometimes designed so as not to disadvantage family farms. For example, dollar limits may be placed on payments that a single person can receive. But our understanding of how government policies have affected the structure of agriculture, or how future policies could be designed to promote specific outcomes remains limited. Leathers has shown that the impact of agricultural programs on the structure of agriculture cannot be predicted by theory alone. A major factor contributing to farm consolidation is economies of scale. Economies of scale allow more agricultural product to be produced at lower per unit costs, but lower per unit costs may also result from increases in productivity, that is, changes in the underlying technology. It is important to account for this continuous and significant technical change in trying to isolate the impact of government programs on U.S. agriculture. Huffman and Evenson, for example, examined how farm structural change and government policies affect productivity. They assumed that farm structure affected productivity, but that farm productivity did not affect farm structure. Public R&D, they found, affects farm structure, while agricultural policies had a small impact on structure. In contrast to Huffman and Evenson, Ahearn, Yee, and Huffman modeled farm structure and productivity as a two-way relationship, and found that government investments had positive and significant impacts on productivity. They also found