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An integer programming dynamic farm-household model to evaluate the impact of agricultural policy reforms on farm investment behaviour

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  • Viaggi, Davide
  • Raggi, Meri
  • Gomez y Paloma, Sergio

Abstract

We develop a multi-objective farm-household dynamic integer programming model to simulate investment behaviour in different policy and price scenarios, with a particular focus on the decoupling of the Common Agricultural Policy (CAP). The model takes into account the characteristics of individual assets, including ageing and fixity through the explicit consideration of transaction costs. A case study application in the context of arable farming in Northern Italy is provided as an example. The results emphasise different patterns of reaction of different farm-household types over time, as an effect of the varying opportunity costs of resources and initial asset endowments. Overall, this application highlights the potentialities and limits of the methodology. In particular, the approach proved to be effective in providing a variety of results depending on the individual features of each farm-household, such as the differences between: (a) a 'no reaction' attitude; (b) an adaptation of farm activity and assets; and (c) a radical reaction pattern guided by high-income alternatives to farming. This highlights the potential of this tool as a generator of ideas and working hypotheses. We argue that, in view of the further developments of the CAP, the use of instruments able to account for multiple objectives, dynamics and investment choices will become even more relevant in the analysis of EU agricultural policy.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 207 (2010)
Issue (Month): 2 (December)
Pages: 1130-1139

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Handle: RePEc:eee:ejores:v:207:y:2010:i:2:p:1130-1139

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Web page: http://www.elsevier.com/locate/eor

Related research

Keywords: OR in agriculture Dynamic models Household models Multi-objective models Investment;

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Cited by:
  1. Bartolini, Fabio & Viaggi, Davide, 2011. "Factors Affecting the Impact of CAP Scenarios on Farm Structure: An Analysis Based on Stated Intentions," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114244, European Association of Agricultural Economists.
  2. Pavel Ciaian & Maria Espinosa & Sergio Gomez y Paloma & Stephen Langrell & Kamel Louhichi & Thierry Vard & Thomas Heckelei & Paolo Sckokai & Alban Thomas, 2013. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," JRC-IPTS Working Papers JRC79969, Institute for Prospective and Technological Studies, Joint Research Centre.
  3. Viaggi, Davide & Raggi, Meri & Puddu, Marco & Bartolini, Fabio, 2013. "Farm/Household-level Simulation Results of Testing Policy and Other Scenarios," Working Papers 157113, Factor Markets, Centre for European Policy Studies.
  4. Viaggi, D. & Bartolini, F. & Puddu, M. & Raggi, M., 2013. "Impact of post-2013 CAP reform on land markets: evidence from farm surveys and farm-level modelling," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152375, International Agricultural Trade Research Consortium.
  5. Puddu,Marco & Bartolini, Fabio & Viaggi,Davide, 2012. "Simulation of Land Use and Investment Behaviour under Different Policy Scenarios: Results of the extended farm/household model," Factor Markets Working Papers 132, Centre for European Policy Studies.
  6. Gebeltova, Zdenka & Pletichova, D., 2012. "Proposal of the Creation of Resources for the Maintenance of the Production Capability of the Agricultural Land Fund by Way of Tax Savings," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(4), December.
  7. Elisa Gatto & Alba Marino & Guido Signorino, 2013. "Biodiversity and risk management in agriculture:what do we learn from CAP reforms? A farm-level analysis," ERSA conference papers ersa13p805, European Regional Science Association.

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