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Price Support, Acreage Controls, and Efficient Redistribution.



This study is concerned with the combination of target price and acreage controls as the two major mechanisms of farm policy. Acreage controls are shown to enhance the efficiency of redistribution under a target price program. More specifically, this study demonstrates that, if the traditional Cobb-Douglas production function is assumed, acreage controls do not enhance the efficiency of target price programs in the process of redistributing income to the farm sector. The study proves that, if the elasticity of substitution between land and all other inputs is less than one, then the income redistributional costs are likely to be reduced. Copyright 1993 by University of Chicago Press.

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