Should We End Agricultural Subsidies?

I’ve come across many articles like this one while researching topic.  This editorial from the Register-Guard in Oregon discusses only the costs of farm subsidies.  The author argues that cutting such programs would “save billions of dollars a year and help bring U.S. agriculture into the 21st century.”  Further, the article criticizes subsidies for benefiting large farms and not doing enough to help family-run operations.  I want to study the possible benefits that subsidies offer.  Editorials like this one always cite the distortion of food prices and counterproductivity but rarely to they address the idea that there may be benefits (other than political pandering) associated with subsidies.  Such sentiments are often found in the arena of public opinion.  I do not intend to discredit articles that call for an end to agricultural subsidies, but I would like to study of the often neglected side of the cost-benefit analysis of subsidies.  If my results turn out to be that there does not appear to be any significant benefits associated with agricultural subsidies, arguments like this author’s become even stronger; there are considerable costs which do not produce substantial benefits.

This editorial  reinforces my approach to analyzing federal agricultural subsidies.  If corporate, large scale farm operations are the ones benefiting the most from these programs, they should be the ones that are examined.  This article also proved helpful because it led me to add another variable that I believe is important to this model.  I had wondered how to incorporate politics into my model but I struggled to think of a way to integrate it.  I thought about adding a dummy variable that would control for years in which an agricultural bill was in effect but I quickly found that a “farm bill” was either enacted or valid every year of my study.  It thus did not make sense to create a dummy variable when each year would be coded 1.  I also thought about creating a dummy variable for which party the president at the time belonged to but that would have been difficult because a president’s term doesn’t end at the end of the calendar year and this variable would ignore the fact that the president’s party and the ruling party in Congress may not be the same party.  Finally, I found an answer on how to include politics into my model: corporate tax rates.  These tax rates help explain the amount of corporate taxes paid while also serving as a proxy for the political climate.  In order to stay within the scope of my paper, I look at only the top corporate tax rate.  This is somewhat limiting because it ignores other corporate tax rates but it is reasonable to assume that the largest agricultural operations will contribute the most to agricultural corporate tax revenue.

One variable that I was unable to come up with an explicit way of measuring is the role of technology.  Technology definitely plays a role in farming but it is hard to represent this effect with a variable for numerous reasons.  Merely determining what qualifies as a significant technological breakthrough would be difficult because I am looking at agriculture in general.  Cattle farmers and crop farmers use different technology to begin with so a technological advance that allows crops to be harvested quicker may not have the same effect on a farmer who grows corn as one who raises cows.  It would also be difficult to measure the impact of technology because to do so would require the assumption that all farms employ the same type and amount of technology.  I do not feel comfortable making this assumption but I am still able to demonstrate the role of technology by proxy by measuring worker productivity.  It is not unreasonable to believe that a significant part of the reason why agricultural workers become more productive is because the technology they are using has improved.


About this entry