Reforming the European Common Agricultural Policy: From price & income support to risk management

Alexandre Gohin () and Yu Zheng ()
Additional contact information
Alexandre Gohin: SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - INSTITUT AGRO Agrocampus Ouest - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement
Yu Zheng: NTU - Nanyang Technological University [Singapour]

Post-Print from HAL

Abstract: Over the last 30 years, the European Union has significantly reformed its Common Agricultural Policy by introducing direct payments to farmers and reducing price support levels. While the European agricultural prices become more volatile, all economic models assessing these reforms remain static and ignore the risk dimensions. This paper develops an original stochastic computable general equilibrium model capturing the different sources of risk, farmers' risk attitude and risk contingent markets. We find that the reduction of price support levels has modest market impacts but negative global welfare effects by exposing risk-averse European farmers to the world price volatility. This issue is not solved by the direct payments, which have negligible market and global welfare impacts through their wealth effects. On the other hand, we find that unbiased futures markets can solve this global welfare issue by allowing European farmers to transfer their price risks. Therefore, European policymakers should ensure well-functioning risk contingent markets rather than maintaining rigid intervention price levels. (C) 2020 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.

Keywords: Common agricultural policy; Risk; Stochastic modeling; Risk contingent market (search for similar items in EconPapers)
Date: 2020-05
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Policy Modeling, 2020, 42 (3), pp.712-727. ⟨10.1016/j.jpolmod.2020.02.008⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02911593

DOI: 10.1016/j.jpolmod.2020.02.008

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().