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Modelling of Agricultural Behavior under the CAP Regime: Assessment of Environmental Impacts and Policy Effectiveness

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  • Constadina Passa

    ()
    (Department of Economics, University of Crete, Greece)

  • Anastasios Xepapadeas

    ()
    (Department of Economics, University of Crete, Greece)

Abstract

The structure of farming activity under the provisions of the generalized regime of the Common Agricultural Policy involving both the first and second pillar elements is modelled. Independently of whether regulated agents exhibit unbounded or bounded rationality, the impact of the different type of CAP measures, as prescribed by Agenda 2000, in the decision making - and thus on the environmental performance of a homogeneous population of farmers - are discussed. The problem of a representative farmer is used for this purpose. After assessing the environmental effectiveness of the various CAP regimes, the mechanism that provides the type of CAP instruments that safeguard the collective attainment of a social environmental target, along with the type of interdependence characterizing them, is defined under the analytical framework of unboundedly and boundedly rational agents respectively. The problem of the optimal regulation of an unboundedly rational population of farmers is discussed in both a static and a dynamic context. The long-run viability of the Agenda 2000 CAP reform is also examined under the assumption of bounded rationality by employing the evolutionary framework of replicator dynamics.

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File URL: http://economics.soc.uoc.gr/wpa/docs/Passa,Xepapadeas-CAP-Envir-Assessment.pdf
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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0818.

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Length: 26 pages
Date of creation: 10 Dec 2007
Date of revision: 01 Jul 2008
Handle: RePEc:crt:wpaper:0818

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Keywords: Environmental impacts; coupling; decoupling; production subsidy; direct payment; cross-compliance principle; rural development subsidy.;

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  1. Joïlle Noailly & Jeroen C.J.M. van den Bergh & Cees A. Withagen, 2003. "Evolution of harvesting strategies: replicator and resource dynamics," Journal of Evolutionary Economics, Springer, vol. 13(2), pages 183-200, 04.
  2. Fennell, Rosemary, 1997. "The Common Agricultural Policy: Continuity and Change," OUP Catalogue, Oxford University Press, number 9780198288572.
  3. Wu, JunJie & Babcock, Bruce A., 2001. "Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution," Staff General Research Papers 1012, Iowa State University, Department of Economics.
  4. Anastasios Xepapadeas & Constadina Passa, 2005. "Design of Public Voluntary Environmental Programs for Nitrate Pollution in Agriculture: An Evolutionary Approach," Working Papers 0512, University of Crete, Department of Economics.
  5. Anastasios Xepapadeas, . "Observability And Choice Of Instrument Mix In The Control Of Externalities," Working Papers 9401, University of Crete, Department of Economics.
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