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Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)

Author

Listed:
  • BOULANGER Pierre

    (European Commission – JRC Seville)

  • PHILIPPIDIS George

    (Aragonese Agency for Research and Development (ARAID) and Wageningen University & Research)

  • URBAN Kirsten

    (Hohenheim University)

Abstract

In 2020, decoupled payments will represent about 42% of the CAP budget (green payments excluded). This report assesses potential effects of European decoupled payments on farmers' production decisions, prior to a sensitivity analysis of different coupling factors using the Modular Applied GeNeral Equilibrium Tool (MAGNET). Scientific literature reveals different coupling channels such as capitalisation in land value, farmers' risk behaviour, credit accessibility, uncertainty about future policies and labour allocation through which European decoupled payments influence farm choices and thus output. For each of these channels the relevant literature introducing theoretical and empirical assessments is evaluated with the aim to derive parameters that improve the representation of decoupled payments in economic simulation models. Within MAGNET, the traditional representation of decoupled payments is a subsidy to the land factor. Nevertheless it appears that the most suitable approach seems to split decoupled payments value into two components, capitalized into the land factor on the one hand, distributed across all factors of production on the other hand. A sensitivity analysis concludes that if one assumes a "degree" of coupling, it does have some implication for output and price results when conducting policy analysis.

Suggested Citation

  • BOULANGER Pierre & PHILIPPIDIS George & URBAN Kirsten, 2017. "Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)," JRC Research Reports JRC104276, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc104276
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    References listed on IDEAS

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    Cited by:

    1. Pierre Boulanger & Kirsten Boysen-Urban & George Philippidis, 2021. "European Union Agricultural Support ‘Coupling’ in Simulation Modelling: Measuring the Sustainability Impacts," Sustainability, MDPI, vol. 13(6), pages 1-17, March.

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    More about this item

    Keywords

    Economic analysis; impact assessment; Common Agricultural Policy; agricultural trade; agricultural markets; modelling tools; database;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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