Assessment of the Effect of the Policy Environment on Farm Decision-Making: Aggregate Acreage Response in the Canadian Prairies Under the Western Grains Stabilization Program

An aggregate acreage supply model for the Canadian prairie provinces is estimated under the assumption that farmers base acreage allocation decisions on the rational ex-ante expectationa and variance of net per hectare revenue. In order to account directly for the effects of government intervention during the period of estimation, a structural model of the Western Grains Stabilization Program is incorporated into the estimation framework. Results indicate that the revenue enhancement and revenue stabilization effects of the program both contributed nearly equally to modest increases in cropped acreage between 1976 and 1990.