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Multifunctionality And Non-Agricultural Supply Of Public Goods

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  • le Cotty, Tristan
  • Voituriez, Tancrede
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    Abstract

    When public goods are joint outputs of agricultural production, there is a trade-off between agricultural and non-agricultural provision of the public good. The principle of minimal price distortion in the reform of agricultural policies has led to a theoretical recommendation that public goods, if under-provided at agricultural free market level, should be promoted through non agricultural policies instead of agricultural policies. We show that the economies of scope between the agricultural production and the joint public good play a key role in determining the optimal way of providing this latter. If the policy designed is a non-agricultural policy, the production cost of the public good is higher than with an agricultural policy. If the policy designed is an agricultural policy, the production cost is lower but generates market effects. Under the assumption of strictly positive economies of scope, we show that the optimal policy is a mix of agricultural and non-agricultural policy. We confirm this result in the two-country case, demonstrating the optimal level of agricultural support for public good provision is strictly positive and lower than in the case of one country.

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    File URL: http://purl.umn.edu/25850
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa with number 25850.

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    Date of creation: 2003
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    Handle: RePEc:ags:iaae03:25850

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    Related research

    Keywords: multifunctionality; jointness; coupled support; protectionism; public good; Resource /Energy Economics and Policy;

    References

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    1. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
    2. Moschini, GianCarlo, 1989. "Normal Inputs and Joint Production with Allocatable Fixed Factors," Staff General Research Papers 11264, Iowa State University, Department of Economics.
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    Cited by:
    1. Casamatta, Georges & Rausser, Gordon C. & Simon, Leo K., 2008. "Optimal taxation with joint production of agriculture and rural amenities," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series, Department of Agricultural & Resource Economics, UC Berkeley qt0nv609hm, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Huber, Robert, 2007. "Bio-Energy-A By-Product Of Rural Landscape Maintenance?," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7619, German Association of Agricultural Economists (GEWISOLA).

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