Supplementing farm price policy by direct income payments: Cost-benefit-analysis of alternative farm policies with a special application to German agriculture

U. Koester and S. Tangermann

European Review of Agricultural Economics, 1977, vol. 4, issue 1, 7-31

Abstract: Summary Increasing problems of EEC farm price policy in balancing allocative and distributive objectives have evoked much criticism and several suggestions for alternative policies. In this paper a proposal gradually to complement price policy by direct income payments to farmers is made. Methodological problems of estimating the economic effects of such a policy shift are discussed. Results of an empirical study for German agriculture are presented. Political problems of implementing this policy are considered. The paper is based on a study prepared for the German Ministry for Agriculture. From the methodological point of view the emphasis is on specific problems of applying cost-benefit-methods to farm price policy. The need for multidimensional objective functions, definition of a reference system, dynamic analysis and consideration of market distortions are stressed. The empirical study shows positive potential benefits of a reduction in price support for a fairly wide range of circumstances.

Date: 1977
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