Policy Design as an Irreversible Investment Under Uncertainty: Norwegian Agriculture and the WTO

Klaus Mittenzwei

No 24875, 2002 International Congress, August 28-31, 2002, Zaragoza, Spain from European Association of Agricultural Economists

Abstract: This paper is concerned with the timing of an agricultural policy reform under uncertainty. The focus is on the opportunity cost of giving up the option to wait when implementing a policy reform. Including the option value in applied policy analysis can help explain why conventional analyses may find observed policies to be Pareto-inferior. Furthermore, it explains why otherwise profitable policy reforms may be delayed. The theoretical model is applied to Norwegian agricultural policy anticipating a prospective WTO agreement. It is argued that the option value should be incorporated into applied policy analysis when high uncertainty prevails.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 16
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae02:24875

DOI: 10.22004/ag.econ.24875

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