Subsidies under uncertainty: Modeling of input- and output-oriented policies

You hua Chen, Mei xia Chen, Ashok K. Mishra

Research output: Contribution to journalArticle

Abstract

Agricultural subsidies play an essential role in agricultural and rural development in many developed economies. Countries have implemented agricultural subsidy policies with a focus on food security and environmental protection. Agricultural production is risky and uncertain, influencing the efficiency of agricultural subsidies. This study develops a theoretical framework to analyze the effects of production uncertainties on the efficiency of agricultural subsidy policies under the double constraints of food security and environmental protection. The basic model is investigated under six different conditions, and expanded research also is presented. Our models show that uncertainty, including output, cost, and price uncertainties, and technology conversion efficiency significantly affects the efficiency of agricultural subsidies. Under high technology conversion efficiency, output-oriented subsidies are appropriate for food security and environmental protection goals. Policymakers should take both uncertainty and production efficiency into consideration when choosing between input-oriented and output-oriented subsidy policies.

Original languageEnglish (US)
Pages (from-to)39-56
Number of pages18
JournalEconomic Modelling
Volume85
DOIs
StatePublished - Feb 2020

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Keywords

  • Efficiency
  • Environmental protection
  • Food security
  • Subsidy
  • Uncertainty

ASJC Scopus subject areas

  • Economics and Econometrics

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