Transfer Efficiency Analysis of Margin‐Based Programs

AgriStability, Canada's major farm support and business risk management program, has been in place since 2007. As with most agricultural insurance programs, AgriStability creates opposing incentives where moral hazard and misallocation effects discourage production while the risk reduction effects encourage production. We investigate the relative size of these effects to determine both the degree to which production is distorted and the percentage of government transfer that remains with the producer. Our results indicate mild but differential effects across crops. We find roughly 45% of program payments remains with primary producers. These findings are of particular interest because of their World Trade Organization implications.