Subsidy Incidence in Factor Markets: An Experimental Approach

Laboratory market experiments are used to estimate the incidence of a stylized subsidy in factor market negotiations with university student and agricultural professional subjects. In separate sessions with both groups, prices converged approximately four and a half tokens higher when a 20-token per-unit subsidy was paid to buyers; this equates to 44% of the predicted 10-token split. A proportional market incentive treatment clarifies this subsidy effect. Discrepancies between predicted and observed incidence are similar to previous empirical estimates of subsidy incidence in agricultural land rental markets. A behavioral anomaly as well as buyer–buyer market competition may contribute to experimental results.


Editor(s):
Marchant, Mary A.
Bosch, Darrell J.
Issue Date:
2013-02
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/143636
Published in:
Journal of Agricultural and Applied Economics, Volume 45, Number 1
Page range:
17-33
Total Pages:
17
JEL Codes:
Q1; Q15; Q18; C92




 Record created 2017-04-01, last modified 2017-11-14

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