Causes of Multifunctionality: Externalities or Political Pressure?

Kathy Baylis, Georges Casamatta (), Stephen Peplow, Gordon Rausser and Leo Simon

No 19297, 2005 Annual meeting, July 24-27, Providence, RI from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The EU has argued that some agricultural subsidies are needed to provide the optimal amount of externalities (both positive and negative) produced by agriculture. The argument is that agriculture is "multifunctional" and externalities such as rural development and landscape would be underproduced, while some forms of pollution (such as nitrogen runoff) would be overproduced without government intervention. Meanwhile, the United States has raised the concern that multifunctionality is primarily an argument to transfer income to producers. In this paper, we discuss the motivation for the EU agri-environmental measures and empirically test for those underlying causes. We find that the programs are not targeted at those regions with the highest environmental need, but neither are they purely a substitute for traditional forms of agricultural subsidies. Demand for general environmental expenditure does influence agri-environmental expenditure as well, as does political structure.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 19
Date: 2005
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Citations: View citations in EconPapers (3)

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Working Paper: CAUSES OF MULTIFUNCTIONALITY: EXTERNALITIES OR POLITICAL PRESSURE (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea05:19297

DOI: 10.22004/ag.econ.19297

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