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Assessing The Market Impacts Of The Common Agricultural Policy: Does Farmers' Risk Attitude Matter?

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  • Zheng, Yu
  • Gohin, Alexandre

Abstract

Recent models assessing the market impacts of Common Agricultural Policy (CAP) reforms are mostly static, non-stochastic and do not account for risks. This paper is a first attempt to fill this gap. We develop a stochastic version of GTAP-AGR model in which we introduce productivity risk and farmers' attitude towards risks. In addition to the price expectation, the expectation on price volatility becomes a key factor for the farmers' decisions. We show that under the endogenous modeling of the CAP instruments, risk aversion leads to larger production and price effects. The impacts are even larger if wealth effect is considered.

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  • Zheng, Yu & Gohin, Alexandre, 2017. "Assessing The Market Impacts Of The Common Agricultural Policy: Does Farmers' Risk Attitude Matter?," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260903, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae17:260903
    DOI: 10.22004/ag.econ.260903
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    References listed on IDEAS

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    1. David A. Hennessy, 1998. "The Production Effects of Agricultural Income Support Policies under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
    2. Brian E. Roe, 2015. "The Risk Attitudes of U.S. Farmers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(4), pages 553-574.
    3. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.
    4. Heckelei, Thomas, 2014. "Volatility and Dynamics in Agricultural and Trade Policy Impact Assessment – Modelling Advances Needed," 2014: Food, Resources and Conflict, December 7-9, 2014. San Diego, California 197177, International Agricultural Trade Research Consortium.
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