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Reforming the Common Agricultural Policy

10 Apr 2015

The objective of the current research is to analyse the farm-specific effect that the different payment mechanisms, including the single farm payment and green payment (GP), have on land use (crop allocation) decisions. [...] A farmer received the subsidy as long as her eligible land is planted to one of the eligible crops, independent of the precise distribution of crops within the eligible set (RVO, 2015). [...] In step 3 of the PMP model, we calibrate the risk coefficient by iteratively increasing the value of φ to the point where it begins to impact the calibrated (observed) crop allocation. [...] The risk aversion coefficient of the small farm is much larger than that of the medium and large farms, whereas the risk aversion coefficient differs to a much lesser extent between the medium and the large farm. [...] Using data for an average farm of 60 ha and the associated allocation of crops (with 1/3 of the land planted to wheat), and based on yield and price data for 2000-2012, we find φ = 0.00009 as the upper bound.
agriculture economics farming conservation wind power mathematics risk social sciences common agricultural policy economic sector single payment scheme human activities farm cap risk-averse cropland expected utility risk aversion exponential utility constant absolute risk aversion variance-covariance matrix
Pages
35
Published in
Victoria, BC, CA

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