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Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)

Pierre Boulanger, George Philippidis and Kirsten Boysen-Urban

No JRC104276, JRC Research Reports from Joint Research Centre (Seville site)

Abstract: In 2020, decoupled payments will represent about 42% of the CAP budget (green payments excluded). This report assesses potential effects of European decoupled payments on farmers' production decisions, prior to a sensitivity analysis of different coupling factors using the Modular Applied GeNeral Equilibrium Tool (MAGNET). Scientific literature reveals different coupling channels such as capitalisation in land value, farmers' risk behaviour, credit accessibility, uncertainty about future policies and labour allocation through which European decoupled payments influence farm choices and thus output. For each of these channels the relevant literature introducing theoretical and empirical assessments is evaluated with the aim to derive parameters that improve the representation of decoupled payments in economic simulation models. Within MAGNET, the traditional representation of decoupled payments is a subsidy to the land factor. Nevertheless it appears that the most suitable approach seems to split decoupled payments value into two components, capitalized into the land factor on the one hand, distributed across all factors of production on the other hand. A sensitivity analysis concludes that if one assumes a "degree" of coupling, it does have some implication for output and price results when conducting policy analysis.

Keywords: Economic analysis; impact assessment; Common Agricultural Policy; agricultural trade; agricultural markets; modelling tools; database (search for similar items in EconPapers)
JEL-codes: C68 F11 Q13 Q18 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017-08
New Economics Papers: this item is included in nep-agr and nep-cmp
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