The Production Effects of Crop Diversification Requirements Under the European Union Greening Policy

Daniel Voica () and Stefan Wimmer
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Daniel Voica: School of Economics and Finance, Massey University
Stefan Wimmer: School of Life Sciences Weihenstephan, Technical University of Munich, Freisling

No 1802, Discussion Papers from School of Economics and Finance, Massey University, New Zealand

Abstract: This paper explores the potential production and land use effects of making subsidy payments subject to crop diversification. We first derive a theoretical model for a rational farmer who receives subsidies contingent on the degree of crop diversification. A state-contingent framework is used to show that crop diversification decisions are independent of risk preferences if farmers have access to off-farm opportunities, such as financial markets. Pricing equations for land allocation and output decisions are derived from the theoretical model and used in a Generalized Method of Moments framework to estimate parameters of interest. We use a panel of crop farms from France, Germany, Poland, and the UK obtained from the EU Farm Accounting Data Network (FADN).

Pages: 21 pages
Date: 2018
New Economics Papers: this item is included in nep-agr and nep-env
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