EconPapers    
Economics at your fingertips  
 

Using Principal-Agent Theory to Deal with Output Slippage in the European Union Set-Aside Policy

Robert Fraser

No 125632, 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia from Australian Agricultural and Resource Economics Society

Abstract: This paper proposes modifications to the existing EU set-aside policy which are designed to alleviate the problem of output slippage associated with heterogeneous land quality by using "incentive-compatible" mechanisms drawn from principal-agent theory. Specifically, it is suggested that there should be differential reference yields based on land quality to discourage the "adverse selection" of lower quality land for set-aside, and that the scope of set-aside monitoring should be expanded to include both the quantity and the quality of land set-aside so as to discourage "moral hazard" problems. The potential of these modifications is illustrated using a numerical analysis, which is also used to evaluate the role of a range of factors which determine the set-aside decision. Finally, an estimate of the "benefits" from reducing slippage required to justify the costs of including these modifications is provided.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Pages: 29
Date: 2001-01
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://ageconsearch.umn.edu/record/125632/files/Fraser.pdf (application/pdf)

Related works:
Journal Article: Using Principal‐Agent Theory to Deal with Output Slippage in the European Union Set‐Aside Policy (2001) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aare01:125632

DOI: 10.22004/ag.econ.125632

Access Statistics for this paper

More papers in 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia from Australian Agricultural and Resource Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).

 
Page updated 2024-12-28
Handle: RePEc:ags:aare01:125632