Using farm‐level panel data from recent U.S. Agricultural Censuses, this study examines how direct government payments influence the survival of farm businesses, paying particular attention to the differential effect of payments across farm‐size categories. A Cox proportional hazards model is used to estimate the effect of government payments on the instantaneous probability of a farm business failure, controlling for farm and operator characteristics. Results indicate that an increase in government payments has a small but statistically significant negative effect on the rate of business failure, and the magnitude of this effect increases with farm size.
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Key et al. (2006) studied this question.
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