- The vast majority of U.S. farm bill spending goes to nutrition assistance, on the one hand, and farm safety net programs, on the other. Although these programs are a major part of federal government expenditures, controversial and governed by a common bill, they have rarely been quantitatively analyzed together. To evaluate the societal impacts of major farm bill programs, this dissertation develops economic simulation models that match the detailed structure of the U.S. economy including multiple households and economic sectors. Certain key parameters of the model, including expenditure elasticities that capture household demand responses, are econometrically estimated while other parameters are calibrated. Sensitivity analysis provides measures of uncertainty around selected model results.
The social costs and benefits of nutrition and farm safety net programs are compared and contrasted at the national level. The programs are found to have important distributional effects, e.g., farm programs tend to slightly reduce the economic welfare of all households in society in general, while nutrition programs have strongly positive effects on low-income households and slightly welfare-reducing effects on higher-income households. It is found that nutrition programs cost households making above $100,000 about $3,216 in a given year, but benefit households making less than $25,000 per year by about $1,303. These programs are found to not be mere transfers but to have important reallocational effects within the economy. Prices of all goods and services are affected, along with wages and the returns to capital, all of which cause actors throughout the economy to alter their choices as a result of the programs. For example, while both programs stimulate activity in the agricultural sector, for example, nutrition programs lead to an increase in agricultural prices, and farm programs lead to a decrease.
Another dimension of the farm bill that is examined is rural-urban differences within the state of Oregon. The focus here is on how nutrition programs, in particular the Supplemental Nutrition Assistance Program (SNAP) affect rural areas differently than urban areas. Rural SNAP-receiving households gain proportionally more in terms of economic welfare than urban SNAP-receiving households, due in part to larger average household size but also due to changes in commodity prices and household income associated with changes in returns to labor and capital. Urban economic activity expands slightly more overall than rural economic activity under SNAP due to the specific types of sectors that are affected by SNAP, and how capital- or labor-intensive they are. The sectors that expand (due to changes in consumer spending patterns under SNAP) tend to be slightly less labor-intensive than those that contract.
In addition, standard poverty indices are also estimated by linking simulation results with consumer expenditure data. These show that SNAP has strong anti-poverty implications in both national and regional setting.