UC Davis Agricultural and Resource Economics

Shon Ferguson, Research Institute of Industrial Economics (IFN)

The Local Impacts of Agricultural Subsidies: Evidence from the Canadian Prairies

Date and Location

Thursday, October 6, 2016, 4:10 PM - 5:30 PM
ARE Library, 4101 Social Sciences and Humanities

Abstract

We estimate the impact of the removal of a railway transportation subsidy on the local economies of Alberta, Saskatchewan and Manitoba, exploiting the large regional variation in these one-time freight rate increases. We find that higher freight rates – and hence lower farm gate prices – resulted in significantly lower farm revenues, farm asset values and farm numbers. Local employment in non-agricultural sectors systematically declined in areas that were hardest hit by the subsidy removal. The results suggest that the subsidy removal had detrimental spillover effects on local non-agricultural economy that are much larger than standard input-output models would predict.

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