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Are CAP Decoupling Policies Really Production Neutral?

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  • Katranidis, Stelios D.
  • Kotakou, Christina A.

Abstract

This paper examines the effects of decoupling policies on Greek cotton production. We estimate a system of cotton supply and input derived demand functions under the hypothesis that producers face uncertainty about prices. Using our estimation results we simulate the effects on cotton production under four alternative policy scenarios: the ‘Old’ CAP regime (i.e. the policy practiced until 2005), the Mid Term Review regime, a fully decoupled policy regime and a free trade-no policy scenario. Our results indicate that cotton production gradually decreases as more decoupled policies are adopted. Moreover, the fully decoupled payment is found to be non-production neutral since it indirectly affects producers’ decisions through the wealth effect.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44184.

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Date of creation: 2008
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Handle: RePEc:ags:eaae08:44184

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Keywords: CAP; decoupling; uncertainty; Agricultural and Food Policy;

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References

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  1. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  2. Sckokai, Paolo & Moro, Daniele, 2002. "Modelling The Cap Arable Crop Regime Under Uncertainty," 2002 Annual meeting, July 28-31, Long Beach, CA 19860, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
  4. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
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Cited by:
  1. Esposti, Roberto, 2008. "Reforming The Cap: An Agenda For Regional Growth?," 109th Seminar, November 20-21, 2008, Viterbo, Italy 44868, European Association of Agricultural Economists.
  2. Rui Fragoso & Carlos Marques & Maria Raquel Lucas & Maria Belém Martins & Raúl Fernandes Jorge, 2009. "The Economic Effects of Common Agricultural Policy Trends on Montado Ecosystem in Southern Portugal," CEFAGE-UE Working Papers 2009_12, University of Evora, CEFAGE-UE (Portugal).
  3. Christina Kotakou & Stelios Katranidis, 2010. "Evaluating the Effects of Decoupled Payments under Output and Price Uncertainty," Discussion Paper Series 2010_04, Department of Economics, University of Macedonia, revised Apr 2010.

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