Reducing the Effectiveness of Agricultural Policy by Information Asymmetry: the case of the Compensation Program for Farm Closure for FTA

In this paper, we analyzed the case of government failure of the Compensation Program for Farm Closure, which is being promoted as part of the domestic supporting measures against FTAs. We identified the causes and suggested several ways to improve the program. The Compensation Program for Farm Closure is one of the policies implemented by the government to enhance the competitiveness of domestic agriculture and stabilize farm household income in the process of FTA implementation. However, during the course of the operation of the program, the government failed. The main reason for government failure is information asymmetry and lack of information among policy stakeholders. As a result, it is necessary to resolve the problem in order to overcome the government failure and improve the effectiveness of the Compensation Program for Farm Closure. As a concrete alternative, it is necessary to improve the accessibility of stakeholders to production, price, and income information, and provide management consulting services at the same time. Only farmers who prove the damage caused by the FTA should be supported through the program.