The aggregate impacts of individual-based income support programs for farmers
Hosseini, Seyyed Safdar
This thesis is a methodological analysis of whole-farm support policies along the lines of the Net Income Stabilization Account (NISA) for grains and oilseeds in Saskatchewan. Such support policies differ from commodity-specific schemes (i.e., price support) in that the unit of measurement is the individual farm rather than a unit quantity of the commodity. Methodologically, price supports can be analyzed solely by reference to aggregate data, generally using aggregate supply and demand curves. This is not possible with whole-farm income support programs, where policy rules on contributions and withdrawals operate at the individual farm level. To analyze the aggregate effects of whole-farm income support policies it is necessary to work at both the aggregate and individual farm level ensuring consistency between the two. The work in this thesis built upon and attempted to correct a fundamental deficiency in earlier work by Spriggs, Taylor, Hosseini, McLennan, and Niekamp (STHMN, 1995) which attempted to estimate the aggregate (provincial-level) effects of a NISA-type whole farm income support program for grains and oilseeds in Saskatchewan. The fundamental deficiency in that earlier work was that the authors failed to allow for supply response to the program. The purpose of this study was to develop an appropriate methodology to analyze the aggregate effects of a NISA-type whole farm program for farmers. An appropriate methodology was developed to conduct this study. Under the SR scenario aggregate crop area was estimated to increase by three percent due to the support program. Thus, crop area was specified as a function of the first two moments of farm-based net income. Furthermore, the study found that gross margin (GM) per acre and aggregate gross margin under the supply response (SR) scenario were higher than that under the no supply response (NSR) scenario. This suggests that, ignoring supply response, results in a downward bias in the estimated GM per acre and aggregate gross margin. The enhancement to gross margin at both the individual and aggregate levels under the SR scenario was lower than that under the NSR scenario. This implies that ignoring supply response, results in an upward bias in the estimated enhancement to gross margin. The aggregate effect of the NISA-type program on government costs under the NSR scenario was a slight downward bias relative to the SR scenario.