The Distribution of U.S. Agricultural Subsidies

Abstract

This paper examines the equity effects of one of the largest per-recipient income transfer programs in the Unites States: the U.S. agricultural subsidy program. The paper demonstrates the complexity of the program's effect on equity and the unintended rent-seeking behavior induced by policies aimed at increasing the program's equity. Although agricultural subsidies accrue disproportionately to large farms, when measured as a proportion of total assets, small farms receive relatively higher subsidies. The paper demonstrates that the vast majority of agricultural subsidies stays with the recipient farmer and is not dissipated to input suppliers or landlords through higher input prices. Yet, the impact on farm household income is mixed; both the median income and the poverty rate are higher among subsidized farmers than the general population. The paper documents substantial rent seeking among farmers who might become constrained by legal limits on total subsidy receipts, indicating that efforts to increase program equity have been ineffective.