We examine the causal relationships between ethanol production and the agricultural economy and rural incomes in the United States for 1981 through 2010. We use bivariate cointegration and Granger causality procedures and account for two structural breaks in ethanol production in the analysis, which shows that ethanol production Granger-caused agricultural net value added, agriculture's share of U.S. employment, net returns to operators, and rural income per capita in the short run. These causal relationships generally persisted in the long run. However, the causality between ethanol and rural incomes diminished in the long run.
