Income Stabilization Through Government Payments: How is Farm Household Consumption Affected?

We estimate the impacts of various types of government payments to U.S. agriculture on different components of farm household consumption. Using 2003 to 2005 data from the Agricultural Resource Management Survey (ARMS), we show that marginal rates of consumption differ by consumption category and income source, including different types of farm program payments. The results suggest that farm households treat income from different sources as imperfect substitutes and may reserve income from specific sources for specific types of consumption. Implications for the effects of different types of government payments on the farm household are considered.