US commodity support payments: On allocation of resources and fairness, post 1996

Haque, Samiul. Ph.D., Purdue University, December 2014. US Commodity Support Payments: On Allocation of Resources and Fairness, Post 1996. Major Professor: Kenneth Foster This dissertation investigates the effect of US commodity support payment on agricultural producer decisions during the “decoupled” regime. Particular attention is paid to the national optimal output mix, input proportions, and farm level changes in scale operations. While “decoupled” payments were instated to comply with WTO guidelines, where tax payer dollars cannot be spent to alter agricultural outputs and /or on farm input decisions, evidence suggests that such payments are far from being decoupled. At the national level, this dissertation finds evidence for mild labor input using and capital input economizing behavior. Substantial land input economizing behavior and moderate material input using behavior due to scale effects of crop production is also observed. However, such a policy does not appear to alter the optimal output mix. The finding that government payments alter the scale of national crop production is further validated while looking at the farm level changes in scale of operation. Farm level data was analyzed using quantile regressions, where the effect of payments on the entire distribution of conditional farm size was quantified. The findings suggest that government payments do increase farm size at