Decoupled Payments: Household Income Transfers in Contemporary U.S. Agriculture

33 Pages Posted: 13 Jul 2005

See all articles by Mary E. Burfisher

Mary E. Burfisher

U.S. Naval Academy

Jeffrey Hopkins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS); Government of the United States of America - House Budget Committee

Date Written: February 2003

Abstract

Decoupled payments are lump-sum income transfers to farm operators that do not depend on current production, factor use, or commodity prices. Such payments are not currently constrained by global trade rules, but many countries argue that they distort production and trade and that their use should be limited. This report examines the U.S. experience with decoupled payments in its Production Flexibility Contracts program under the Federal Agriculture Improvement and Reform (FAIR) Act of 1996. The payments have improved the well-being of recipient farm households, enabling them to comfortably increase spending, savings, investments, and leisure but with minimal distortion of U.S. agricultural production and trade. However, farm operators may retain as little as 40 percent of program benefits due to higher land rents. While commercial farms received the largest share of decoupled payments, they rent in over two-thirds of their program acres, which suggests that a sizable portion of their program benefits may be passed through to nonfarming landowners.

Suggested Citation

Burfisher, Mary E. and Hopkins, Jeffrey W., Decoupled Payments: Household Income Transfers in Contemporary U.S. Agriculture (February 2003). USDA-ERS Agricultural Economic Report No. 822. Available at SSRN: https://ssrn.com/abstract=757888 or http://dx.doi.org/10.2139/ssrn.757888

Mary E. Burfisher (Contact Author)

U.S. Naval Academy ( email )

589 McNair Road
Annapolis, MD 21402
United States
410-293-6880 (Phone)

Jeffrey W. Hopkins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5584 (Phone)

Government of the United States of America - House Budget Committee ( email )

Washington, DC 20515
United States

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