A Second Look at Subsidies and Supply
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The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.
CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.
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A previous article in the Iowa Ag Review (Fall 1999, Vol. 5, No. 4) pointed out that because subsidies tend to increase the supply of whatever is subsidized, crop insurance subsidies and emergency disaster assistance will likely increase crop supplies. This supply response will decrease crop prices. That subsidies encourage supply is not controversial; however, some controversy has arisen concerning the estimated magnitude of the resulting price impact