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Subsidy Incidence in Factor Markets: An Experimental Approach

Published online by Cambridge University Press:  26 January 2015

Amy M. Nagler ,
Dale J. Menkhaus ,
Christopher T. Bastian ,
Mariah D. Ehmke  and
Kalyn T. Coatney
Amy M. Nagler
Affiliation:
Department of Agricultural and Applied Economics, University of Wyoming, Laramie, Wyoming
Dale J. Menkhaus
Affiliation:
Department of Agricultural and Applied Economics, University of Wyoming, Laramie, Wyoming
Christopher T. Bastian
Affiliation:
Department of Agricultural and Applied Economics, University of Wyoming, Laramie, Wyoming
Mariah D. Ehmke
Affiliation:
Department of Agricultural and Applied Economics, University of Wyoming, Laramie, Wyoming
Kalyn T. Coatney
Affiliation:
Department of Agricultural Economics, Mississippi State University, Starkville, Mississippi
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Extract

Laboratory market experiments are used to estimate the incidence of a stylized subsidy in factor market negotiations with university student and agricultural professional subjects. In separate sessions with both groups, prices converged approximately four and a half tokens higher when a 20-token per-unit subsidy was paid to buyers; this equates to 44% of the predicted 10-token split. A proportional market incentive treatment clarifies this subsidy effect. Discrepancies between predicted and observed incidence are similar to previous empirical estimates of subsidy incidence in agricultural land rental markets. A behavioral anomaly as well as buyer-buyer market competition may contribute to experimental results.

Keywords

agricultural policyex-ante policy analysisfactor marketlaboratory market experimentsland rental marketprofessional vs. student subject poolssubsidy incidenceQlQ15Q18C92
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 45 , Issue 1 , February 2013 , pp. 17 - 33
Copyright
Copyright © Southern Agricultural Economics Association 2013

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Footnotes

*Southern Agricultural Economics Association members

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