Decoupling Agricultural Policies in CGE Models: Theory and Empirics (original) (raw)
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Revisiting Decoupled Agricultural Policies in CGE frameworks: Theory and Empirics
2014
The Common Agricultural Policy (CAP) is moving away from coupled payments towards an increasing emphasis on decoupled payments. However current CGE models to study effects of decoupled payments remain limited. This paper introduces the application of a CGE model framework for a comparative analysis of possible effects caused by coupled and decoupled support on agricultural and food sectors in an economy. The CGE model used is the STAGE_AGR which is an extension of the STAGE model containing equations that permit modellers to introduce different system of decoupled payment representation. We have taken as empirical example the case of Ireland for modelling agricultural payments either as fully or partially decoupled.
Modelling the Impact of Decoupled Payments on Farm Production
2019
The distorting effect of agricultural subsidies on production decisions has been a major topic of debate in agricultural policy analysis for several decades. In light of the 2003 and the 2013 Common Agricultural Policy (CAP) reforms in the EU which delinked payments from current production, this paper examines the impact of decoupled payments on farm production in Northern Ireland using a farm-level panel dataset for the 2008 – 2016 period. An instrumental variable fixed effect model is employed, which allows important sources of endogeneity to be controlled for. Empirical results reveal that decoupled payments had significant positive effects on production outcomes but with differential impacts across sectors. The findings suggest that decoupled payments still maintain a significant effect on agricultural production. One likely explanation for this is that farmers may still be using decoupled payments to partly subsidise unprofitable farm production.
2019
Decoupled payments such as the basic payment scheme in the EU still accounts for an important share of the EU budget spent for the Common Agricultural Policy. Since the impact of decoupled payments on farm level output decisions via other coupling channels such as capitalization in land value, farmers' risk behavior, credit accessibility, uncertainty about future policies and labor allocation is controversially discussed, the objective of this article is to provide a thorough review of the relevant literature to compile the best available estimated parameters, incorporate them in a CGE modelling framework and simulate different scenarios to quantify the impact about different assumptions on models' results.
The economic impact of allowing partial decoupling under the 2003 Common Agricultural Policy reforms
Disaggregated Impacts of CAP Reforms, 2011
The agreement to decouple EU direct farm payments from production and introduce the Single Payment Scheme (SPS) was formally made by the Council of Agricultural Ministers in June 2003. Due to concerns raised, the SPS provided Member States the scope to retain some coupled support and this option was taken up by some Member States but not others. Within the UK, Scotland was the only country to take advantage of Article 69 and pay a coupled payment for beef calves (under the Scottish Beef Calf Scheme). This paper, through using conceptual and empirical analyses, assesses whether and to what extent partial decoupling affected the single market and the effect that it had on the EU, member states and Scotland. The results of a modelling exercise (using the CAPRI model) highlight that production in coupled countries is higher than would be the case if they had decoupled, and this has subsequent impacts on other EU Member States through price and trade effects. This is particularly the case in the beef sector. Scottish producers would have been an estimated £31.6m pounds better off if all EU countries had fully decoupled under the reforms. This highlights that Scottish Agriculture was disadvantaged by the decision made in 2003 to allow partial coupling of payments. In addition, even though it would have led to the removal of the Scottish Beef Calf Scheme, beef producers would have been better off if full decoupling had been implemented and Article 69 measures not allowed.
The Common Agricultural Policy in Multisectoral Models
Documento de trabajo del INEA (Istituto …, 2001
This paper will appear as La Politica Agricola Comune nei modelli multisettoriali in: Giovanni Anania, edt., Valutare gli effetti della Politica agricola Comune. Lo "stato dell'arte" dei modelli per l'analisi quantitativa degli effetti delle politiche agricole dell 'Unione Europea, Edizioni Scientifiche Italiane, 2001, pp. 181 -252.
In this paper we assess the impact of different agricultural labor and capital market specifications on agricultural employment and income under different agricultural policies. We derive a dynamic agricultural employment equation linking changes in agricultural employment with changes in income per worker earned in agriculture compared with that in other sectors. We implement the estimated equation in a Computable General Equilibrium model based on the Global Trade Analysis Project model-GTAP (Hertel, 1997). In order to analyze the effects of agricultural policies on the agricultural sector, we run a reference policy scenario including EU direct payments decoupling, EU milk quota abolition and the EU agricultural offer in the WTO negotiations. In order to analyze the effects of the new dynamics on the agricultural factor markets, we compare simulation results with the new dynamics with a perfect competition run as applied in standard GTAP and CET labor and capital supply functions as implemented in GTAP-AGR model (Keeney and Hertel, 2005). We show how the new dynamics makes the long-run simulations much more plausible and makes it possible to show the effects of different timings of reforms on agricultural income and employment.
Food Economics - Acta Agriculturae Scandinavica, Section C, 2009
We evaluate overall economic effects of EU CAP reform implemented in 2006 in Finland. We also simulate a case where national subsidies are decoupled from production as well. We find that the ongoing trend of decoupling farm payments from production, if extended to national supports, will decrease agricultural and food production considerably. We report impacts on agriculture and other industries as well as on different groups of households in terms of income and welfare. An increasing part of the subsidies for agriculture will be direct income support. We consider here a case where the level of the support is tied equally to the hectares of arable land owned by farmers, pensioners and other households. The computable general equilibrium (CGE) GemRur simulation model of Finland is our working tool. Our results suggest that already the CAP reform is a challenge to the food economy. There will be production losses in agriculture and food processing but income and welfare effects favour the other consumers. Income and welfare of farmers suffer from the reforms. However, the effects on overall employment and farm income are relatively small while the overall welfare change is clearly positive.
Economic and household impacts of policy interventions in the Irish agri-food sector until 2020
Over the period 2005-2020, the Irish agri-food sector is confronted with three major policy changes: the decoupling of the single farm payment, the elimination of the dairy quota and potential multilateral trade liberalisation as part of an agreement in the Doha Development Round. This paper studies these reforms and their impacts on the economy and income distribution using a CGE model particularly rich in detail on agri-food sectors, differentiated household groups, and agricultural policy instruments including their links to productive factors and households. This allows customising the model to appropriately represent the specific policy instruments and their actual or potential changes. The results suggest that the past and projected changes in the policy environment have, in sum, a small positive impact on GDP and household income. But, the gains and losses are unequally distributed across sectors and household groups due to the highly differentiated distribution of support an...
Sustainability, 2020
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