Date of Submission

Spring 2012

Academic Program

Economics

Project Advisor 1

Kris Feder

Abstract/Artist's Statement

Farm subsidies in the U.S. were introduced during the 1930's as ''a temporary solution to deal with an emergency'', referring to the downward-spiraling farm incomes that afflicted the 25% of U.S. population living on farms. Yet, currently less than 1% of the U.S. population is employed in farms and those farmers' household incomes are well above the national average.

This paper employs basic cost-benefit economic analysis and shows that the biggest farm subsidy programs currently active serve as income-transfer channels always leading to a loss of national welfare. Thus it motivates the discussion on why these inefficient and regressive policy measures still persist in a democratic and affluent county such as the U.S., especially at annual direct costs of $25 billion. Insights from the political economy models by Swinnen (1994), Grossman and Helpman (2004), Gawande and Hoekman (2006), Park and Jensen (2007), and Thies and Porche (2007), strongly suggest such that perverse policy behavior can be actually rationalized on the basis of the current institutional framework in the U.S. Specific characteristics of this framework are examined in relation to the voter, the political agent, and special-interest groups, in order to shed some light on how they define the possible circuits inside the policy-making process and ultimately, the policy outcome. Projecting forward into the future, the static nature of these institutional factors in combination with the opportunities for rent-seeking that they facilitate makes the prospects for policy reform in the U.S. seem highly unlikely.

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Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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