The Trade Adjustment Assistance (TAA) Program for Farmers in the U.S.: Role of Incentives in Program Participation

Abstract

The Trade Adjustment Assistance (TAA) program for farmers was established in 2002 to assist farmers adversely affected by import surges. Since its introduction, the program has been mostly underused by farmers, and the American Recovery and Reinvestment Act (ARRA) in 2009 eased the program rules to encourage more farmers to participate. Why has farmers’ participation in the program been so low? Have the relaxed criteria of the ARRA been effective in encouraging farmers’ participation? Based on a simple decision-making model and a uniquely constructed panel data set, we find that farmers’ incentive to make up for losses in other types of direct government payments as well as eligibility criteria explain farmers’ participation in the TAA program. Less time and efforts needed for participation, proxied by previously approved cases of the same or similar commodities, also seems to drive farmers’ participation. Results also confirm that the ARRA of 2009 was effective in increasing farmers’ participation.