Income transfer efficiencies of U.S. farm payment programs

There is a need to evaluate United States farm policy relative to its objective of raising farm families' incomes. In the past income transfer efficiency has been used to measure the increase in household income per dollar of payment outlaid. However, past studies have failed to take into account the effect farm payments may have on time allocation between leisure, off-farm work and the farm. This study will link the farm household to the farm by estimating the full income transfer efficiencies, in other words the increase in full household income including the value of leisure consumed per dollar of payment outlaid. In order to do this farm shadow wages are derived from the farm production function and then the lesser of the farm shadow wage and the off farm wage is used to value the time spent in leisure. This value is then added to monetary household income to arrive at full household income. From there, full household income is used to estimate the income transfer efficiencies of three government payment categories: direct payments, production and marketing payments, and conservation-oriented payments, for corn and soybean farmers in the Heartland region. Results show direct payments and production and marketing payments have full income transfer efficiencies which are not significantly different than one. Results for conservation-oriented payments are inconclusive.