How different types of government payments and the elimination of direct payments affect farm productivity? Evidence from Kansas crop farms

Figures & data

Table 1. Descriptive statistics of the study variables for the sample of Kansas farms (N = 9,531) from 2009 to 2018.

Variable	Unit	Mean	Std. Dev.
Output	$10,000*	62.711	68.494
Intermediate inputs	$10,000*	27.318	28.626
Capital	$10,000*	52.672	56.728
Labour	AWU	376.173	314.858
Land	Acres	1749.545	1527.219
Debt-to-asset ratio	Ratio	0.269	0.326
Age	Years	57.731	13.067
Non-farm income	$10,000	3.741	7.116
Direct payments	$10,000	0.670	1.463
ARC/PLC payments	$10,000	1.241	2.292
Loan deficiency payments	$10,000	0.036	0.365
Conservation payments	$10,000	0.217	0.934
Disaster payments	$10,000	0.504	1.921
State government payments	$10,000	0.042	0.470
Other government payments	$10,000	0.129	0.774
Market gain payments	$10,000	0.041	0.363
Conservation reserve payments	$10,000	0.090	0.343

The asterisk (*) denotes an implicit quantity index.

Figure 1. Average dollars received by the sample farms per payment type and year for the period 2009–2018.

LDP, CRP, ARC, and PLC stand for loan deficiency, conservation reserve program, agricultural risk coverage, and price loss coverage payments, respectively.

Figure 2. Percentage of sample farms that received different government payments.

LDP, CRP, ARC, and PLC stand for loan deficiency, conservation reserve program, agricultural risk coverage, and price loss coverage payments, respectively.

Table 2. Results of instrumental variables GMM regression on farm output for Kansas crop farms for the period 2009 to 2018.

Variables	Coef.
m	0.4909***	(0.0561)
l	0.2303***	(0.0214)
c	0.1766***	(0.0336)
a	−0.0165	(0.0230)
L.c	0.3742	(0.8644)
L.c^2	−0.0570	(0.0698)
L.c^3	0.0022	(0.0019)
L.m	−3.5996**	(1.6366)
L.m^2	0.3145**	(0.1352)
L.m^3	−0.0087**	(0.0037)
L.direct payments	0.0377***	(0.0098)
L.direct payments^2	−0.0067**	(0.0031)
L.direct payments^3	0.0003	(0.0002)
L.ARC/PLC payments	0.0054	(0.0062)
L.ARC/PLC payments^2	0.0001	(0.0008)
L.ARC/PLC payments^3	−0.0000	(0.0000)
L.LDP	0.0046	(0.0203)
L.LDP^2	−0.0025	(0.0037)
L.LDP^3	0.0002	(0.0001)
L.conservation payments	0.0143	(0.0135)
L.conservation payments^2	−0.0014	(0.0041)
L.conservation payments^3	0.0001	(0.0003)
L.disaster payments	−0.0025	(0.0111)
L.disaster payments^2	0.0013	(0.0018)
L.disaster payments^3	−0.0000	(0.0001)
L.state payments	0.0026**	(0.0011)
L.state payments^2	−0.0000	(0.0000)
L.state payments^3	0.0000	(0.0000)
L.other payments	−0.0081	(0.0173)
L.other payments^2	0.0066	(0.0052)
L.other payments^3	−0.0006*	(0.0003)
L.market gain payments	−0.0222	(0.0349)
L.market gain payments^2	0.0123	(0.0140)
L.market gain payments^3	−0.0009	(0.0011)
L.CRP	0.0064**	(0.0030)
L.CRP^2	−0.0005**	(0.0002)
L.CRP^3	0.0000***	(0.0000)
t	−0.0701***	(0.0030)
t^2	0.0103***	(0.0011)
debt-to-asset ratio	−0.0940***	(0.0170)
age	−0.0033***	(0.0004)
non-farm income	−0.0017***	(0.0005)
Constant	15.7499***	(5.7133)
R-squared	0.9064
Wald χ^2	55,908.37***	-

m, l, c and a, denote the natural logarithms of intermediate inputs, labour, capital and land, respectively (in line with Equation (6)(6) $y_{it}={\beta }_0+{\beta }_m{m}_{it}+{\beta }_k{k}_{it}+{\beta }_a{a}_{it}+{\beta }_l{l}_{it}+{\beta }_c{c_{it-1}}^{\prime }+{\beta }_z{z_{it}}^{\prime }+{\beta }_{1}t+{\beta }_2{t}^2+{\psi }_{it}$(6) ). Lagged variables are denoted with a leading “L”. LDP, CRP, ARC, and PLC stand for loan deficiency, conservation reserve program, agricultural risk coverage, and price loss coverage payments, respectively.

*,** and *** denote statistical significance at the 10%, 5% and 1% levels, respectively. Robust standard errors in parenthesis.

Table 3. Average marginal effects of government payments on productivity ${\omega }_{it}$.

	Mean
L.direct payments	0.0326***	(0.0036)
L.ARC/PLC payments	0.0054	(0.0057)
L.LDP	0.0044	(0.0200)
L.conservation payments	0.0139	(0.0124)
L.disaster payments	−0.0021	(0.0106)
L.state payments	0.0026**	(0.0011)
L.other payments	−0.0074	(0.0165)
L.market gain payments	−0.0214	(0.0341)
L.CRP	0.0058**	(0.0028)

** and *** denote statistical significance at the 5% and 1% levels, respectively. Standard errors, in parenthesis, are computed using the delta method.

Figure 3. Evolution of aggregate TFP (i.e. lnTFP_t) over the 2011–2018 period (2011 = 1) for Kansas crop farms.

Aggregate TFP values start in 2011 since lags up to order two were used in the estimation of farm-level TFP, which are needed to calculate aggregate TFP. Aggregate TFP is normalized to one in 2011.

Table A1. Results of instrumental variables GMM regression on farm output for Kansas crop farms for the period 2009 to 2018-government payments as dummy variables.

VARIABLES	Coef.
m	0.5179***	(0.0547)
l	0.2100***	(0.0212)
c	0.1690***	(0.0347)
a	0.0046	(0.0230)
L.c	0.3730	(0.8524)
L.c^2	−0.0557	(0.0688)
L.c^3	0.0021	(0.0018)
L.m	−3.5527**	(1.4897)
L.m^2	0.3071**	(0.1228)
L.m^3	−0.0085**	(0.0034)
L.direct payments dummy	0.0430***	(0.0095)
L.ARC/PLC payments dummy	0.0053	(0.0121)
L.LDP dummy	−0.0952***	(0.0178)
L.conservation payments dummy	0.0249**	(0.0106)
L.disaster payments dummy	−0.0010	(0.0154)
L.state payments dummy	0.0453***	(0.0146)
L.other payments dummy	0.0134	(0.0134)
L.market gain payments dummy	−0.0090	(0.0218)
L.CRP dummy	0.0080	(0.0081)
trend	−0.0669***	(0.0031)
trend2	0.0099***	(0.0010)
debt-to-asset ratio	−0.0957***	(0.0168)
age	−0.0034***	(0.0004)
non-farm income	−0.0015***	(0.0005)
Constant	16.4348***	(5.6216)
R-squared	0.9066

m, l, c and a, denote the natural logarithms of intermediate inputs, labour, capital and land, respectively. Lagged variables are denoted with a leading “L.”. LDP, CRP, ARC, and PLC stand for loan deficiency, conservation reserve program, agricultural risk coverage, and price loss coverage payments, respectively. *, ** and *** denote statistical significance at the 10%, 5% and 1% levels, respectively. Robust standard errors in parenthesis.

Table A2. Results of instrumental variables GMM regression on farm output for Kansas crop farms for the period 2009 to 2018-combined government payments.

	Model 1		Model 2
VARIABLES	4 types of payments		3 types of payments
m	0.4942***	(0.0564)	0.4989***	(0.0563)
l	0.2267***	(0.0214)	0.2280***	(0.0214)
c	0.1762***	(0.0334)	0.1764***	(0.0336)
a	−0.0126	(0.0229)	−0.0146	(0.0229)
L.c	0.5552	(0.8090)	0.4040	(0.8442)
L.c^2	−0.0722	(0.0654)	−0.0596	(0.0682)
L.c^3	0.0026	(0.0017)	0.0022	(0.0018)
L.m	−4.5910**	(1.9587)	−3.6253**	(1.5780)
L.m^2	0.3958**	(0.1616)	0.3160**	(0.1303)
L.m^3	−0.0110**	(0.0044)	−0.0088**	(0.0036)
L.direct payments	0.0363***	(0.0097)	0.0390***	(0.0096)
L.direct payments^2	−0.0061**	(0.0030)	−0.0066**	(0.0030)
L.direct payments^3	0.0003	(0.0002)	0.0003	(0.0002)
L.ARC/PLC payments	0.0042	(0.0061)	0.0052	(0.0061)
L.ARC/PLC payments^2	0.0001	(0.0008)	−0.0000	(0.0008)
L.ARC/PLC payments^3	−0.0000	(0.0000)	−0.0000	(0.0000)
L.environmental payments	0.0084***	(0.0025)
L.environmental payments^2	−0.0005**	(0.0002)
L.environmental payments^3	0.0000***	(0.0000)
L.other payments I	0.0029**	(0.0011)
L.other payments I^2	−0.0000*	(0.0000)
L.other payments I^3	0.0000	(0.0000)
L.other payments II			0.0035***	(0.0008)
L.other payments II^2			−0.0000***	(0.0000)
L.other payments II^3			0.0000**	(0.0000)
t	−0.0701***	(0.0030)	−0.0696***	(0.0030)
t^2	0.0105***	(0.0011)	0.0103***	(0.0011)
debt-to-asset ratio	−0.0915***	(0.0170)	−0.0921***	(0.0170)
age	−0.0034***	(0.0004)	−0.0034***	(0.0004)
non-farm income	−0.0017***	(0.0005)	−0.0017***	(0.0005)
Constant	20.0012***	(7.2172)	16.6894***	(5.8958)
R-squared	0.9061		0.9060

m, l, c and a, denote the natural logarithms of intermediate inputs, labour, capital and land, respectively (in line with Equation (6)(7) $\begin{array}{rl}& ln{\widehat{TFP}}_{it}={\hat{\beta }}_0+{c_{it}^{\prime }}_{-1}{\hat{\beta }}_c+z_{it}^{\prime }{\hat{\beta }}_z+t{\hat{\beta }}_1+t^2{\hat{\beta }}_2+{\psi }_{it}\\ & =y_{it}-\left({\hat{\beta }}_m{m}_{it}+{\hat{\beta }}_k{k}_{it}+{\hat{\beta }}_a{a}_{it}+{\hat{\beta }}_l{l}_{it}\right)\end{array}$(7) ). Lagged variables are denoted with a leading “L.”. “Environmental payments” include conservation, CRP and disaster payments. “Other payments I” include state, other, LDP, and market gain payments. “Other payments II” include all but direct and ARC/PLC payments. *, ** and *** denote statistical significance at the 10%, 5% and 1% levels, respectively. Robust standard errors in parenthesis.

Table A3. Average marginal effects of government payments on productivity ${\omega }_{it}$ for the models where government payments are aggregated in different groups.

	Model 1	Model 3
	4 types of payments	3 types of payments
L.direct payments	0.0316***	0.0338***
L.ARC/PLC payments	0.0042	0.0052
L.environmental payments	0.0075***
L.other payments I	0.0028***
L.other payments II		0.0033***

Lagged variables are denoted with a leading “L.”. “Environmental payments” include conservation, CRP and disaster payments. “Other payments I” include state, other, LDP, and market gain payments. “Other payments II” include all but direct and ARC/PLC payments. *, ** and *** denote statistical significance at the 10%, 5% and 1% levels, respectively.

Table A4. Results of instrumental variables GMM regression on farm output for Kansas crop farms for the period 2009 to 2018-no government payments.

	Coef.
m	0.6385***	(0.0628)
l	0.2237***	(0.0234)
c	0.1018***	(0.0335)
a	−0.0185	(0.0246)
L.c	0.5752	(0.7567)
L.c^2	−0.0683	(0.0614)
L.c^3	0.0025	(0.0016)
L.m	−5.8706***	(1.5854)
L.m^2	0.4825***	(0.1306)
L.m^3	−0.0131***	(0.0036)
t	−0.1776***	(0.0059)
t^2	0.0421***	(0.0018)
debt-to-asset ratio	−0.0796***	(0.0188)
age	−0.0033***	(0.0004)
non-farm income	−0.0015***	(0.0006)
Constant	25.1770***	(6.2158)
R-squared	0.9135

m, l, c and a, denote the natural logarithms of intermediate inputs, labour, capital and land. Lagged variable are denoted with a leading “L.”. *, ** and *** denote statistical significance at the 10%, 5% and 1% levels, respectively. Robust standard errors in parenthesis.