|Abstract or Summary
- The U.S. farm sector has undergone dramatic structural change during the
past fifty years, a chief result being that the number of large farms has increased
relative to the number of small farms. Numerous agricultural policies have been
instituted, with the partial objective of preserving the family farm. At the same
time, a number of studies have attempted to ascertain the contribution of various
forces, including farm programs, toward the observed changes in average farm
size. These studies have tended to concentrate on aggregate effects, ignoring farm-level
and dynamic effects of program and nonprogram factors on farm growth.
The present study overcomes such limitations by utilizing a farm-level
dynamic growth model which links consumption, production, and investment
decisions. Steady-state comparative static and local comparative dynamic analysis
of the dynamic model solutions indicate qualitative effects of program and
nonprogram factors on farm growth. Simulation of quantitative effects are conducted on econometric estimates of the dynamic model solutions, using Kansas
wheat farm data.
Empirical results show that set-aside-percentage-type instruments (required
and voluntary set-aside percentages) induce longrun net equity increases in small
farms and longrun net equity decreases in large farms. In both size classes, set-aside
instruments increase longrun land holdings, the increases being greater in
larger than in smaller farms. After considering effects on rented land, the effect of
set-aside-type instruments on overall scale of operation is negligible.
Payment-rate-type instruments (per-acre deficiency, voluntary and paid
diversion payment rates) increase longrun net equity and consumption in both
small and large farms. They lead to longrun land ownership increases in small
farms and decreases in large farms. However, they lead also to increases in rented
land, the increase being greater in larger than in smaller farms. Net effect on
scale of operation is nonsignificant.
Finally, nonprogram factors affect growth also. Technical change increases
net equity and landholding in large farms more than in small farms. In both large
and small farms, increases in prices of land's substitutes, lead to net equity
increases, whereas increases in prices of complements reduce net equity. In the
longrun, output price increases encourage consumption and reduce net equity.