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Decoupled Payments and the Localization of Activities

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  • Daniel, Karine
  • Kilkenny, Maureen

Abstract

This article considers the impacts of (de)coupled farm sector support on the locations of farming and agro-industrial activity. An economic geography model is developed which has two types of regions, one with extensive agricultural production (rural), the other with intensive farming that is more densely populated (urban). The farm and agro-industrial sectors are vertically linked. A service sector that is not directly linked to either basic industry is also explicit. We show that coupled and decoupled subsidies affect the spatial distribution of farming, industry, and service sector activity. Support that is provided to all farmers regardless of crop, thus semi-decoupled, increases spatial agglomeration. Support targeted to farmers of particular crops, especially rural comparative advantage crops, favors increased farming in rural areas but spatial agglomeration of non-farm activity still occurs. This latter targeting approach is used in the European Union.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24942.

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Date of creation: 2002
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Handle: RePEc:ags:eaae02:24942

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Related research

Keywords: location; agriculture; economic geography; decoupling; Agricultural Finance; R12; R58; Q18;

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  1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  2. Maureen Kilkenny, 1995. "Transport Costs and Rural Development," Food and Agricultural Policy Research Institute (FAPRI) Publications 95-wp133, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  3. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  4. Ottaviano, Gianmarco Ireo Paolo & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  5. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  6. Federico TRIONFETTI, 1997. "Public Expenditure and Economic Geography," Annales d'Economie et de Statistique, ENSAE, issue 47, pages 101-120.
  7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
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