Analysis of the Influences of Direct Payment Policy on the Rice Acreage
2015
Ahn, B.I., Korea University, Seoul, Republic of Korea
Production theory tells that farmers acreage decision is influenced by own product price, input prices as well as policy variables that affect price or production. In case of rice, direct payment policy which is composed of fixed and variable payments is the most influential governmental support in terms of the rice farmersincome and their acreage decision. Empirical estimation of rice acreage response function which is derived from the profit maximization problem of rice farmers and includes the anticipation of rice price with naive and adaptive expectations as well as option value approach indicates that elasticity of the rice acreage with respect to own price is the largest. The input price is estimated to be the second most important factor in making the acreage decision by rice farmers. The fixed payment from government is estimated to have no significant influence on the rice acreage, which is consistent with theory. The variable payment is proven to have significant influence on the rice acreage. However, its impacts is estimated to be very small. Estimation result indicates that if variable payment is increased by 1 percent, rice acreage would be increased by only 0.001 precent.
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