Production Effects of Direct Payments to Active Farmers: a Microeconomic Dynamic and Stochastic Analysis

Alain Carpentier, Alexandre Gohin and Christoph Heinzel

No 122447, 123rd Seminar, February 23-24, 2012, Dublin, Ireland from European Association of Agricultural Economists

Abstract: For the 2014-2020 phase of the Common Agricultural Policy, the European Commission has the opportunity to reduce the leakage of public support to landowners and to better target it towards active farmers. Our purpose is to assess whether shifting the basis of direct payments from land towards active farmers will significantly alter agricultural production decisions. In a dynamic and stochastic microeconomic framework, we identify the impact of this shift on the farm household’s production and consumption decisions. In the dynamic setting the production impacts of direct payments are much higher than previously quantified, because the “long run” absolute risk aversion (associated with the value function) is lower than the “short run” one (associated with direct utility). In our dynamic setting, the impact profiles are opposed for initially poor and initially wealthy farmers, due to their different precautionary motives. Leakage to land owners is lower with an active-farmer than with a land subsidy, so that the production impact is higher.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 16
Date: 2012-02-24
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://ageconsearch.umn.edu/record/122447/files/Carpentier.pdf (application/pdf)

Related works:
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:eaa123:122447

DOI: 10.22004/ag.econ.122447

Access Statistics for this paper

More papers in 123rd Seminar, February 23-24, 2012, Dublin, Ireland from European Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().