Effects of differing farm policies on farm structure and dynamics

The relationships between productivity, government farm programs, and structural change were modeled to estimate the net effects of government farm programs on farm structure. The model was estimated by three-stage least squares, incorporating cross-equation correlation of disturbances. A panel data set constructed for forty-eight states and four time periods (1982, 1987, 1992 and 1996) was employed. It was found that commodity payments reduced the share of small farms, increased the share of large farms, and increased farm exits during 1982-96. This was consistent with the traditional view that farmers use commodity payments to expand their farms.