Estimating the Costs of Revenue Deficiency Programs

This paper develops an approach to empirically demonstrate how the within-season distribution of U.S. domestic commodity support for corn differs between current-style approaches of support and revenue-based support. From a purely economic standpoint, the results show the revenue-based payment scenarios to be preferable at the national level to the uncoordinated forms of support currently in use, even in a situation where the annual mean payments are set equal across the support scenarios. For revenue-based support, the variability around the total expected annual payment is lower, and perhaps more importantly, the probability of high payments is lower. These results suggest advantages to this type of support, both in terms of lower budgetary uncertainty – for producers and the Federal government – and in meeting multilateral commitments for limiting spending on domestic commodity support.