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Abstract

A new model is presented to assess the effects of changes in agricultural target prices, support prices, diversion payments, and eligibility requirements on farmer's production decisions. The central features of this paper are (1) complete incorporation of the past and current program offerings into the farmer's objective function, (2) the entire period of estimation is over a time in which program compliance was voluntary, (3) consideration is given to the effects of government programs on both acreage and yield responses, and (4) Zellner's seemingly unrelated regression method of estimation was used to estimate the entire system of equations. The estimated elasticities indicate that, while sectoral government programs can be used to reduce acreage they are relatively ineffective in reducing total output.

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