Coupling Effects of Direct Payments of Korea and the U.S.

The United States introduced PFC (Production Flexibility Contract) which was decoupled with production in 1996 Farm Bill. PFC was developed into the Direct Payment and the Counter-Cyclical Payment in 2002 Farm Bill. Similar direct payment was in place in Korea in 2005, which is composed of two types of payment, the Fixed and Variable Direct Payment. It has been controversial that these payment schemes are really decoupled with production. This paper investigates whether the direct payments which are in place in Korea and the United States are decoupled or not theoretically