Efficient allocation of land in a decoupled world

Maurice Roche and Kieran McQuinn

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: In this paper we investigate whether specialist producers of Irish cereals were allocating land efficiently in a mean-variance sense during the 1993-2002 time period. We then expand the model to examine the potential implications on the land allocation decision of the 2002 EU Commission’s proposed mid-term reform of the Common Agricultural Policy. One-year ahead rolling forecasts of conditional moments of Irish cereal prices are generated using a multivariate autoregressive conditional heteroscedastic model. These forecasts are used to construct expected efficient frontiers for each year between 1993 and 2002. Our findings indicate that in every year specialist producers of Irish cereals were allocating land efficiently ex ante. We also show that the proposed introduction of decoupled payments will change the efficient frontier facing Irish cereal producers and probably induce producers to allocate more land to the higher returning yet relatively riskier wheat crop.

Keywords: Cereal Prices; Risk; Return; Multivariate ARCH (search for similar items in EconPapers)
JEL-codes: C32 F31 G15 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2003-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n1190103

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