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The Effects of Farm Subsidies on Farm Exports in the United States
journal contribution
posted on 2019-07-01, 00:00 authored by Lan TongLan Tong, Cong PhamCong Pham, M A UlubaşoǧluWe estimate the elasticity of U.S. farm exports to U.S. farm subsidies using a gravity model of state-level farm exports to 100 major trading destinations for the period 1999 to 2011. Our identification strategy exploits the within-state variation that is free of endogeneity bias in the levels and trends of farm subsidies and farm exports. We find that a 1% decrease in farm subsidies would reduce U.S. farm exports by 0.40% per annum. This equivalently means that the complete abolishment of the farm subsidy program would reduce U.S. farm exports by approximately $15.3 billion per year. Importantly, we document robust evidence that amber box subsidy programs such as counter-cyclical payments and marketing loan gains have the strongest effect on farm exports, while green box subsidy payments, such as direct payments have negligible effects. Finally, subsidy payments affect exports only in agricultural commodities, not in livestock. Our subsidy elasticity estimates are statistically significant, stable, and economically meaningful, and are vitally needed by U.S. and global policymakers in the face of critical domestic and international developments.
History
Journal
American Journal of Agricultural EconomicsVolume
101Issue
4Pagination
1277 - 1304Publisher DOI
ISSN
0002-9092eISSN
1467-8276Publication classification
C1 Refereed article in a scholarly journal; C Journal articleCopyright notice
2019, The Author(s)Usage metrics
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No categories selectedKeywords
Science & TechnologySocial SciencesLife Sciences & BiomedicineAgricultural Economics & PolicyEconomicsAgricultureBusiness & EconomicsFarm subsidiesUS farm billsgravity equationUS farm exportsAGRICULTURAL SUBSIDIESCOMMODITY PROGRAMSDOMESTIC SUPPORTSUPPLY RESPONSETRADEPAYMENTSDECISIONSIMPACTINCOMEACTU.S. farm billsU.S. farm exports
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