| Registro completo |
| Provedor de dados: |
AgEcon
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| País: |
United States
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| Título: |
A STOCHASTIC DYNAMIC PROGRAMMING MODEL OF DIRECT SUBSIDY PAYMENTS AND AGRICULTURAL INVESTMENT
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| Autores: |
Vercammen, James
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| Data: |
2003-12-05
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| Ano: |
2003
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| Palavras-chave: |
Agricultural and Food Policy
Agricultural Finance
International Development
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| Resumo: |
A stochastic dynamic programming model is used to compare the farmland investment impact of a fully decoupled direct payment and a standard price subsidy. The direct payment induces the farmer to invest because it lowers the farm's debt to asset ratio, which in turn reduces the probability of bankruptcy. The value of the real option to defer the investment decision is lower with a lower risk of bankruptcy, and thus the direct payment results in a higher probability of immediate investment. Simulation results demonstrate that for a farm facing moderate revenue and land price variability, the impact of a decoupled direct payment on farm investment is nearly as large as the investment impact of an equal-sized price subsidy. These results suggest that direct payments, such as those associated with U.S. production flexibility contracts, should be carefully scrutinized in on-going multilateral trade negotiations.
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| Tipo: |
Working or Discussion Paper
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| Idioma: |
Inglês
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| Identificador: |
11314
http://purl.umn.edu/15847
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| Editor: |
AgEcon Search
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| Relação: |
University of British Columbia>Food and Resource Economics>Working Papers
Food and Resource Economics Working Paper, 2003-05
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| Formato: |
35
application/pdf
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