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Abstract
We focus on determining the impacts of government programs on farms’ technical
inefficiency levels. We use Kumbhakar’s stochastic frontier model that accounts for
both production risks and risk preferences. Our theoretical framework shows that
decoupled government transfers are likely to increase (decrease) DARA (IARA)
farmers’ production inefficiencies if variable inputs are risk decreasing. However, the
impacts of decoupled payments cannot be anticipated if variable inputs are risk
increasing. We use farm-level data collected in Kansas to illustrate the model.