Do Agricultural Supports Affect Production? A Panel ARDL Analysis of Turkey

Year 2023, Volume: 29 Issue: 1, 249 - 261, 31.01.2023

Erdem Bulut , Yüksel Bayraktar

https://doi.org/10.15832/ankutbd.988246

Cited By: 2

Abstract

One of the controversial issues in the trade negotiations carried out with the World Trade Organization deals with agricultural supports related to production, which is claimed to disrupt the market system by creating an imbalance in supply and demand in the domestic market and to cause world trade contraction. In this context, the aim of this study is to examine the production effect of the deficiency payments and land-based direct supports widely used in Turkey. The study conducts a panel autoregressive distributed lag analysis for 11 selected agricultural products (wheat, corn, sunflower, seed cotton, paddy, soybean, canola, safflower, tea, dried beans, and olives) for the 2002-2019 period. The findings from the study are as follows: i) Increases in deficiency payments and land-based direct supports increase short and long run production. However, land-based direct supports have less of an effect on production. ii) While increases in input prices have a negative short run effect on production, the long run effect is the opposite. iii) Agricultural product price is not an important indicator for producers. This finding can be explained by the fact that farmers accept agricultural supports as a complement to the price variable in their production decisions. iv) Increases in the minimum wage added to the model based on Turkey’s structural characteristics have a negative long run impact on production. v) No statistically significant relationship exists between the number of tractors used to represent agricultural mechanization and the amount of production.

Keywords

Production effects of the agricultural supports, Decoupled payments, Deficiency payments, Land-based direct supports, Minimum wage

References

• Adams G, Westhoff P, Willott B & Young II R E (2001). Do ‘Decoupled’ Payments Affect U.S. Crop Area? Preliminary Evidence from 1997-2000. American Journal of Agricultural Economics, 83(5): 1190-1195
• Aktaş E, Altıok M & Songur M (2015). Farklı Ülkelerdeki Tarımsal Destekleme Politikalarının Tarımsal Üretim Üzerine Etkisinin Karşılaştırmalı Analizi. Anadolu Üniversitesi Sosyal Bilimler Dergisi, 15(4): 55-74
• Anton J & Mouel L C (2004). Do Counter-Cyclical Payments in the 2002 US Farm Act Create Incentives to Produce? Agricultural Economics, 31(2): 277–284
• Arumugam S, Ozkan B, Jayaraman A & Mockaisamy P (2021). Impacts of Covid-19 Pandemic on Global Agriculture, Livelihoods and Food Systems. Journal of Agricultural Sciences, 27(3): 239-246
• Baltagi H B & Kao C (2010). Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey, Syracuse University Center for Policy Research Working Paper
• Baltagi H B, Qu F & Kao C (2012). A Lagrange Multiplier Test for Cross-Sectional Dependence in a Fixed Effects Panel Data Model. Journal of Econometrics, 170(1): 164-177
• Bayraktar Y & Bulut E (2016). Tarımsal Desteklerin Değişen Yapısı ve Yüksek Tarımsal Desteklerin Nedenleri: Türkiye için Karşılaştırmalı Bir Analiz. İktisat Fakültesi Mecmuası, 66(1): 45-66
• Becker D A & Judge P R (2014). Evidence of Distortionary Effects of Decoupled Payments in US Indica Rice Production. Atlantic Economic Journal, 42(3): 265-275
• Beckman J F & Wailes E J (2005). The Supply Response of U.S. Rice: How Decoupled Are Income Payments? American Agricultural Economics Association Annual Meeting
• Borawska B A, Borawski P, Guth M, Parzonko A, Rokicki T, Klepacki B, Wysokinski M, Maciag A & Dunn W J (2021). Price Changes of Dairy Products in the European Union. Agricultural Economics-Czech, 67(9): 373-381
• Cahill S A (1997). Calculating the Rate of Decoupling for Crops under CAP/Oilseeds Reforms. Journal of Agricultural Economics, 48(1-3): 349-378
• Çakmak H E, Kasnakoğlu H & Akder A H (1999). Tarım Politikalarında Yeni Denge Arayışları ve Türkiye, TÜSİAD
• Çakmak H E, Kasnakoğlu H & Yıldırım T (1998). Fark Ödeme Sisteminin Ekonomik Analizi, TEAE
• Canbay Ş (2021). Does Agricultural Support Policy Affect Crop Production in Turkey? Bartın University Journal of Faculty of Economics and Administrative Sciences, 12(23): 130-140
• Castellano-Álvarez F J, Parejo-Moruno F M, Rangel-Preciado J F & Cruz-Hidalgo E (2021). Regulation of Agricultural Trade and Its Implications in the Reform of the CAP The Continental Products Case Study. Agriculture, 11(7): 633
• Demirdöğen A & Olhan E (2017). Türkiye Tarımının Kısa Tarihi: Destekleme Politikası Özeli. Tarım Ekonomisi Dergisi, 23(1): 1-12
• Demirdöğen A, Olhan E & Chavas J P (2016). Food vs. Fiber: An Analysis of Agricultural Support Policy in Turkey. Food Policy, (61): 1-8
• Doğan H G, Kan M & Kan A (2018). Türkiye’de Fark Ödemesi Desteklemelerinin Bazı Hububat Ürünlerinin Üretici Kararlarına Etkilerinin Değerlendirilmesi. Anemon Muş Alparslan Üniversitesi Sosyal Bilimler Dergisi, 6(6): 945-951
• Eğri T (2014). 2000 Sonrası Türk Tarım Politikalarında Dönüşüm ve Çiftçi Algısı: Kırklareli Örneği. Anadolu Üniversitesi Sosyal Bilimler Dergisi, 14(1): 89-104
• Erdal G, Erdal H & Çiçek A (2020). An Analysis of the Effects of Livestock Support Policies on Breeders: An Example of TR83 Region in Turkey. Turkish Journal of Agriculture-Food Science and Technology, 8(11): 2378-2387
• Erdal H, Erdal G & Ayyıldız B (2021). Are Support Policies for Sustainable Livestock Important? Causality between Animal Existence and Support Policies: VECM Analysis for Turkey. The Journal of Animal & Plant Sciences, 31(1): 254-264
• Frandsen E S, Gersfelt B & Jensen, G H (2003). The Impacts of Redesigning European Agricultural Support. Review of Urban and Regional Development Studies, 15(2): 106-131
• Goodwin K B & Mishra K A (2005). Another Look at Decoupling: Additional Evidence on the Production Effects of Direct Payments. American Journal of Agricultural Economics, 87(5): 1200-1210
• Goodwin K B & Mishra K A (2006). Are Decoupled Farm Program Payments Really Decoupled? An Empirical Evaluation. American Journal of Agricultural Economics, 88(1): 73-89
• Haß M (2021). Coupled Support for Sugar Beet in the European Union: Does It Lead to Market Distortions? Journal of Agricultural Economics, 73(1): 86-111
• Hennessy D A (1998). The Production Effects of Agricultural Income Support Policies under Uncertainty. American Journal of Agricultural Economics, 80(1): 46–57
• Katranidis D S & Kotakou A C (2008). Are CAP Decoupling Policies Really Production Neutral? European Association of Agricultural Economists
• Key N & Roberts J M (2008). Do Decoupled Payments Stimulate Production? Estimating the Effect on Program Crop Acreage Using Matching. American Agricultural Economics Association
• Komarek M A, Drogue S, Chenoune R, Hawkins J, Msangi B H & Flichman G (2017). Agricultural Household Effects of Fertilizer Price Changes for Smallholder Farmers in Central Malawi. Agricultural Systems, 154: 168-178 Maddala S G & Wu S (1999). A Comparative Study of Unit Root Tests with Panel Data and A New Simple Test. Oxford Bulletin of Economics and Statistics, 61(1): 631-652
• Nash E F (1961). Agriculture. In: Arthur Selton (Ed.), Agenda for a Free Society: Essays on Hayek’s: The Constitution of Liberty, The Institute of Economic Affairs, London, pp. 170-191
• Nicholls H W & Gale D J (1946). The Farm Price Policy Awards, 1945: A Topical Digest of the Winning Essays. Journal of Farm Economics, 27(1): 267-283
• O'Donoghue J E & Whitaker B J (2010). Do Direct Payments Distort Producers' Decisions? An Examination of the Farm Security and Rural Investment Act of 2002. Applied Economic Perspectives and Policy, 32(1): 170-193
• OECD (1998). Agricultural Policies in OECD Countries: Measurement of Support and Background Information, Paris
• OECD (2000). Decoupling: A Conceptual Overview, Paris
• OECD (2001). The Uruguay Round Agreement on Agriculture. An Evaluation of Its Implementation in OECD Countries, Paris
• OECD (2005). Decoupling-Policy Implications, Paris
• Pedroni P (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 61(1): 653-670
• Pesaran M H & Shin Y (1999). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis, In: S Storm (Ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge, 1999
• Pesaran M H & Smith P R (1995) Estimating Long-Run Relationship from Dynamic Heterogeneous Panels. Journal of Econometrics, 68(1): 79-113
• Pesaran M H (2004). General Diagnostic Tests for Cross Section Dependence in Panels, Discussion Paper Series IZA DP No. 1240
• Pesaran M H (2007). A Simple Panel Unit Root Test in the Presence of Cross-Section Dependence. Journal of Applied Econometrics, 23(2): 265-312
• Pesaran M H, Shin Y & Smith P R (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446): 623-625
• Pesaran M H, Shin Y & Smith J R (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16(3): 289-326
• Richter A E (2015). Doha Development Round: Why Did It Fail? Anchor Academic Publishing, Hamburg
• Samargandi N, Fidrmuc J & Ghosh S (2013). Is the Relationship between Financial Development and Economic Growth Monotonic for Middle Income Countries? Economics and Finance Brunel University Working Paper Series
• Srivastava K S, Chand R & Singh J (2017). Changing Crop Production Cost in India: Input Prices, Substitution and Technological Effects. Agricultural Economics Research Review, 30: 171-182
• Suh H D & Moss B C (2021). Examining the Input and Output Linkages in Agricultural Production Systems. Agriculture, 11(1): 54
• Swerling G B (1959). Income Protection for Farmers: A Possible Approach. Journal of Political Economy, 64(2): 173-186
• Taylor D R & Koo W W (2008). Changes in Agricultural Input Costs and Their Impact on Net Farm Income. Agribusiness & Applied Economics 637, North Dakota State University
• Van Donkersgoed E (1988). Decoupling: A Family Farm and Stewardship Approach. In: Finkle P & Cameron D (Eds), Decoupling: The Concept and Its Future in Canada, Agriculture Canada, Ottawa, pp. 28-62
• Weber G J & Key N (2012). How Much Do Decoupled Payments Affect Production? An Instrumental Variable Approach with Panel Data. American Journal of Agricultural Economics 94(1): 52-66
• Westcott P C & Young C E (2004). Farm Program Effects on Agricultural Production: Coupled and Decoupled Programs. In: Burfisher M E & Hopkins J (Eds), Decoupled Payments in a Changing Policy Setting. Agricultural Economic Report No. 838, Economic Research Service, U.S. Department of Agriculture, Washington, pp. 7-17
• Winters L A (1988). The So-Called "Non-Economic" Objectives of Agricultural Support, OECD
• Wooldridge M J (2012). Introductory Econometrics: A Modern Approach, South-Western
• WTO (1994). Agreement on Agriculture, Geneva
• WTO (2016). Agriculture. The WTO Agreements Series, 3. Edition, Geneva
• Xie H & Wang B (2017). An Empricial Analysis of the Impact of Agricultural Product Fluctuations on China’s Grain Yield. Sustainability, 9(6): 906
• Yıldız F (2017). Türkiye’de Merkezi Yönetim Bütçesinden Yapılan Tarımsal Destekleme Ödemelerinin Tarımsal Üretim Üzerindeki Etkisi: 2006-2016 Dönemi. Sayıştay Dergisi, 104: 45-63
• Yüceer S E, Tan S & Semerci A (2020) Türkiye’de 2000-2020 Döneminde Tarımsal Destekleme Politikalarının Gelişiminin İncelenmesi. Lapseki Meslek Yüksekokulu Uygulamalı Araştırmalar Dergisi 1(2): 36-46
• Yükseler Z (1999). Tarımsal Destekleme Politikaları ve Doğrudan Gelir Desteği Sisteminin Değerlendirilmesi, DPT