Stop-and-go agricultural policies

The optimal design of farm policy and public investment in agriculture in t he presence of asymmetric information between the government and farmers is studied. it is shown that a mix of capped deficiency payments and voluntar y paid land diversion can implement the optimal policy outcome. Optimal pro gram design requires large farmers to farm all their land, and small farmer s may or may not divert acreage;Decoupled policies are never optimal.