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Decoupled Payments: Household Income Transfers in Contemporary U.S. Agriculture Mary E. Burfisher and Jeffrey Hopkins (editors) Agricultural Economic Report No. (AER822) 33 pp, February 2003 Decoupled payments are lump-sum income transfers to farm operators that do not depend on current production, factor use, or commodity prices. Such payments are not currently constrained by global trade rules, but many countries argue that they distort production and trade and that their use should be limited. This report examines the U.S. experience with decoupled payments in its Production Flexibility Contracts program under the Federal Agriculture Improvement and Reform (FAIR) Act of 1996. The payments have improved the well-being of recipient farm households, enabling them to comfortably increase spending, savings, investments, and leisure but with minimal distortion of U.S. agricultural production and trade. However, farm operators may retain as little as 40 percent of program benefits due to higher land rents. While commercial farms received the largest share of decoupled payments, they rent in over two-thirds of their program acres, which suggests that a sizable portion of their program benefits may be passed through to nonfarming landowners. Keywords: decoupled payments, WTO, world trade organization, production flexibility contracts, households, well-being, ERS, USDA In this report ... Chapters are in Adobe Acrobat PDF format. Frontmatter, 67 Kb Introduction, 40 Kb Decoupled Payments as Income Transfers: Conceptual Framework of the Study, 52 Kb Implementation of the U.S. Production Flexibility Contract Program, 57 Kb Effects of Decoupled Payments on Household Consumption, Savings, and Investment, 57 Kb Decoupled Payments and Farm Labor, 45 Kb Effects of Decoupled Farm Payments on Aggregate Agricultural Supply, 42 Kb Need for Additional Research, 29 Kb Conclusions, 30 Kb Recommended Readings, 39 Kb Appendix, 29 Kb Entire Report, 455 Kb Order this report (stock #ERSAER822) web administration: webadmin@ers.usda.gov page updated: February 14, 2003

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