There is an interesting new article forthcoming in the journal Applied Economic Perspectives and Policy by Stephan Goetz and Meri Davlasheridze.
Here's the abstract.
A few thoughts/comments:
- It seems that spending on agricultural extension saves more farms than farm subsidies. Surprisingly, the authors find a negative relationship between farm subsidies in one year and farm profitability the next year.
- I'm not 100% sold that the authors have identified causal relationships. A more vibrant agricultural sector will likely demand (i.e., lobby for) more extension. The authors attempt to deal with this by looking at lagged (rather than current) spending on extension on current farm profitability. I suppose they also partially deal with this by looking only at federal spending to states rather than state spending.
- While the authors find a positive relationship between spending on ag research and farm profitability, there is no relationship between research spending and change in farm numbers. This finding must be interpreted in light of the large literature on the positive relationship between ag research and increased farm productivity; this research allows for long lag times between spending and impacts and finds very high rates of return to ag research spending.