Macroeconomic Impacts of U.S. Farm and Nutrition Programs

Abstract

This study estimates the economy-wide impacts of two components of U.S. federal spending- nutrition programs and farm support programs-using an applied general equilibrium model. Both programs slightly reduce overall economic output and have important distributional effects. Farm programs reduce expenditures on a wide array of goods and services throughout the economy, including agricultural products, primarily since the programs reduce the spending power of taxpayers in general. Nutrition programs also reduce expenditures for some goods and services but raise the demand for agricultural products as well certain sectors for which the marginal propensity to consume is high among low-income households.