This survey paper explores the literature on decoupling of farm programs that has emerged in the last 10 years. The paper identifies and assesses the various channels of potential coupling of decoupled farm payments and provides taxonomy of coupling mechanisms found in theoretical and empirical papers. Coupling of decoupled payments is pervasive but effects when measurable are small, with the exception of the impact on land values. The paper points to unresolved issues on potential coupling mechanisms for further research.
We analyze the coupling effect of expectations about base acreage and yield updating in future farm policy on production decisions in the presence of price, yield, and policy uncertainty for a risk‐averse farmer producing a single crop. The farmer receives market revenue and government payments. Using stochastic dynamic programming, optimum decisions under present value calculations positively link current acreage and fertilizer decisions to future government payments through expected updates of base acreage and yield in the future regime. Moving from a zero probability of updating to a probability of one increases optimum acreage and yield by 6.25% and 0.134%, respectively.
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