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Abstract

Voluntary participation in U.S. farm programs significantly influences the economic consequences of these programs. The voluntary nature of these programs produces two important considerations for policy analysis. First, program provisions designed to induce participation create distortions in farm production. Second, commodity and factor mark:~t equilibriums depend crucially on the actual level of participation. U.S. farm programs are designed to provide income transfers and affect market prices through supply control. The effectiveness of supply control depends on the level of farmer participation, which, in tum, depends on the expected benefits to participants. Therefore, to estimate the effectiveness and economic consequences of farm policy options, it is important to model program participation. This report presents a general equilibrium model of the U.S. farm and nonfarm sectors. The main features of the model include the depiction of participation by farmers in the programs, explicit modeling of agricultural program instruments, and capital investment.

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