TY - JOUR AU - Goodwin, Barry K AU - Mishra, Ashok K AU - Ortalo-Magné, François TI - The Buck Stops Where? The Distribution of Agricultural Subsidies JF - National Bureau of Economic Research Working Paper Series VL - No. 16693 PY - 2011 Y2 - January 2011 DO - 10.3386/w16693 UR - http://www.nber.org/papers/w16693 L1 - http://www.nber.org/papers/w16693.pdf N1 - Author contact info: Barry Goodwin Departments of Economics and Agricultural and Resource Economics North Carolina State University Box 8109 Raleigh, NC 27695 E-Mail: barry_goodwin@ncsu.edu Ashok K. Mishra Department of Agricultural Economics and Agribusiness Louisiana State University Agricultural Center 211 Ag. Administration Bldg. Baton Rouge, LA 70803 E-Mail: AMishra@agcenter.lsu.edu Francois Ortalo-Magné School of Business University of Wisconsin, Madison 5259 Grainger Hall 975 University Avenue Madison, WI 53706-1323 E-Mail: fom@london.edu M1 - published as Barry K. Goodwin, Ashok K. Mishra, François Ortalo-Magné. "The Buck Stops Where? The Distribution of Agricultural Subsidies," in Joshua S. Graff Zivin and Jeffrey M. Perloff, editors, "The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies" University of Chicago Press (2012) M3 - presented at "Agricultural Economics Conference", March 4-5, 2010 AB - The U.S. has a long history of providing generous support for the agricultural sector. A recent omnibus package of farm legislation, the 2008 Farm Bill (P.L. 110-246) will provide in excess of $284 billion in financial support to U.S. agriculture over the 2008-2012 period. Commodity program payments account for $43.3 billion of this total. Our paper is concerned with the distribution of these benefits. Farm subsidies make agricultural production more profitable by increasing and stabilizing farm prices and incomes. If these benefits are expected to persist, farm land values should capture the subsidy benefits. We use a large sample of individual farm land values to investigate the extent of this capitalization of benefits. Our results confirm that subsidies have a very significant impact on farm land values and thus suggest that landowners are the real benefactors of farm programs. As land is exchanged, new owners will pay prices that reflect these benefits, leaving the benefits of farm programs in the hands of former owners that may be exiting production. Approximately 45% of U.S. farmland is operated by someone other than the owner. We report evidence that owners benefit not only from capital gains but also from lease rates which incorporate a significant portion of agricultural payments even if the farm legislation mandates that benefits must be allocated to producers. Finally, we examine rental agreements for farmers that rent land on both a cash and share basis. We find evidence that farm programs that are meant to stabilize farm prices provide a valuable insurance benefit. ER -