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The efficiency of direct payments versus tax reductions under uncertainty

This paper analyzes the optimal behavior of farmers in the presence of direct payments and uncertainty. In an empirical analysis for Switzerland, it confirms previously obtained theoretical results and determines the magnitude of the theoretical predicted effects. The results show that direct payments increase agricultural production between 3.7% to 4.8%. Alternatively to direct payments, the production effect of tax reductions is evaluated in order to determine its magnitude. The empirical analysis corroborates the theoretical results of the literature and demonstrates that tax reductions are also distorting, but to a substantially lesser degree if losses are not offset. However, tax reductions, independently whether losses are offset or not, lead to higher government spending than pure direct payments

Universitat de Girona. Departament d’Economia

Other contributions: Universitat de Girona. Departament d’Economia
Author: Goetz, Renan-Ulrich
Keusch, Alois
Ribas Tur, Joan
Abstract: This paper analyzes the optimal behavior of farmers in the presence of direct payments and uncertainty. In an empirical analysis for Switzerland, it confirms previously obtained theoretical results and determines the magnitude of the theoretical predicted effects. The results show that direct payments increase agricultural production between 3.7% to 4.8%. Alternatively to direct payments, the production effect of tax reductions is evaluated in order to determine its magnitude. The empirical analysis corroborates the theoretical results of the literature and demonstrates that tax reductions are also distorting, but to a substantially lesser degree if losses are not offset. However, tax reductions, independently whether losses are offset or not, lead to higher government spending than pure direct payments
Document access: http://hdl.handle.net/2072/14651
Language: eng
Publisher: Universitat de Girona. Departament d’Economia
Rights: Aquest document està subjecte a una llicència Creative Commons: Reconeixement – No comercial – Sense obra derivada (by-nc-nd)
Rights URI: http://creativecommons.org/licenses/by-nc-nd/3.0/deed.ca
Subject: Pagament
Agricultura -- Aspectes econòmics
Impostos sobre la renta
Title: The efficiency of direct payments versus tax reductions under uncertainty
Type: info:eu-repo/semantics/workingPaper
Repository: Recercat

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