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

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 some parts of the conditional distribution and not others, and these effects are bigger for larger farms. This dissertation provides empirical evidence that commodity support programs provide advantage to large farming operations in terms of increasing scale of operation. Perhaps as heterogeneous farmers enlarge or diminish their share of agricultural production, the marketplace systematically selects those with similar management strategies or technological capacities in each case, thus shifting the national production technology