Decoupling Direct Payments and the Dynamics of Decisions under Price Risk in Cattle Farms

Aude Ridier and Florence Jacquet

Journal of Agricultural Economics, 2002, vol. 53, issue 3, 549-565

Abstract: The impact of decoupling direct payments from production on producers' decisions, taking account of price uncertainty and risk aversion, is analysed through a multi‐period mathematical programming model. This model is applied to beef cattle farms in two French regions: Limousin and Pays de la Loire. The technical coefficients are represented by an engineering production function estimated for both regions. The behavioural parameters have been obtained through a survey and model calibration. Policy changes have been modelled through different simulation scenarios relating to the decoupling of direct payments. Model results show that decoupling policies produce a more homogenous response from different types of farmers. The share of cattle activities on farms decreases and the production techniques become less intensive.

Date: 2002
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