ACREAGE EFFECTS OF DECOUPLED PROGRAMS AT THE EXTENSIVE MARGIN

This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits, particularly the Agricultural Market Transition Act (AMTA) and market loss assistance payments, bring about distortions in production for wheat and barley production in the Northern Great Plains. The issue is important in light of the upcoming WTO negotiations and debate over the distortionary effects of such decoupled ("green-box") payments. Our results suggest that a modest, though statistically significant effect on acreage may have been evoked by AMTA payments. In particular,if the over $45 billion allocated to AMTA payments and market loss assistance had been doubled, wheat acreage may have been 7% greater and barley acreage may have been 12.8% higher. Models of land idling suggest that AMTA payments have a very modest effect on land idling in this region. We note that the nature of our data may result in an upward bias in AMTA and MLA payment effects, such that our analysis provides conservative estimates.