 Using Principal‐Agent Theory to Deal with Output Slippage in the European Union Set‐Aside PolicyJournal of Agricultural Economics, 2001, vol. 52, issue 2, 29-41 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. Date: 2001 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jageco:v:52:y:2001:i:2:p:29-41 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Agricultural Economics is currently edited by David Harvey More articles in Journal of Agricultural Economics from Wiley Blackwell |
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