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How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?

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Author Info

  • Frédéric Courleux
  • Hervé Guyomard
  • Fabrice Levert
  • Laurent Piet

Abstract

The 2003 Common Agricultural Policy (CAP) reform radically changes the way the European Union (EU) supports its agricultural sector by decoupling direct payments. Production is no longer required to get the payment attached to Single Farm Payment (SFP) entitlements. However, the new scheme maintains a specific link between payments and hectares; in addition, SFP entitlements can be exchanged among farmers. These features question the way SFP entitlements should be regarded, hence modelled, i.e., as lump-sum transfers, area payments or… something else. We develop a microeconomic analytical framework which shows that the answer crucially depends on the total number of entitlements which are initially made available relative to the number of hectares, more specifically the number of cultivated hectares in a zero support regime, the number of cultivated hectares in a policy support regime trough per-hectare direct aids, and the number of cultivated or idled hectares in a policy regime where support is granted through direct aids per hectare and production is not required.

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Bibliographic Info

Paper provided by INRA UMR SMART in its series Working Papers SMART - LERECO with number 08-01.

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Date of creation: 2008
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Handle: RePEc:rae:wpaper:200801

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Related research

Keywords: European Union; Common Agricultural Policy; Single Farm Payment; modelling; area payments; lump-sum transfers;

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References

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  1. Joe Dewbre & Jes�s Ant�n & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
  2. Huettel, Silke & Kleinhanss, Werner & Offermann, Frank, 2005. "Impacts of Decoupling and Milk Quota Trade on the French and German Dairy Sectors," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24731, European Association of Agricultural Economists.
  3. Alexandre Gohin, 2006. "Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(3), pages 415-440.
  4. Markus F. Hofreither & Erwin Schmid & Franz Sinabell, 2004. "Phasing out of Environmentally Harmful Subsidies: Consequences of the 2003 CAP Reform," WIFO Working Papers 239, WIFO.
  5. Gelan, Ayele & Schwarz, Gerald, 2006. "A Policy Impact Evaluation Model For Scotland: Decoupling Single Farm Payments," MPRA Paper 1491, University Library of Munich, Germany.
  6. Bascou, Pierre & Londero, Pierluigi & Munch, Wolfgang, 2004. "Reform and Adjustment in the European Union: The 2003 Reform of the Common Agricultural Policy and Enlargement," IAPRAP\IATRC Summer Symposium, Adjusting to Domestic and International Agricultural Reform in Industrial Countries, June 6-7, 2004, Philadelphia, PA 15769, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
  7. Binfield, Julian C.R. & Westhoff, Patrick C. & Young, Robert E., II, 2003. "Reforming The Cap: A Partial Equilibrium Analysis Of The Mtr Proposals," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25856, International Association of Agricultural Economists.
  8. Oliver Balkhausen & Martin Banse & Harald Grethe, 2008. "Modelling CAP Decoupling in the EU: A Comparison of Selected Simulation Models and Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 57-71, 02.
  9. Breen, James P. & Hennessy, Thia C. & Thorne, Fiona S., 2005. "The effect of decoupling on the decision to produce: An Irish case study," Food Policy, Elsevier, vol. 30(2), pages 129-144, April.
  10. Jeroen Buysse & Bruno Fernagut & Olivier Harmignie & Bruno Henry de Frahan & Ludwig Lauwers & Philippe Polomé & Guido Van Huylenbroeck & Jef Van Meensel, 2007. "Farm-based modelling of the EU sugar reform: impact on Belgian sugar beet suppliers," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 21-52, March.
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Citations

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Cited by:
  1. Sahrbacher, Christoph, 2011. "Regional structural change in European agriculture: Effects of decoupling and EU accession," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 60, number 60.
  2. Viaggi, Davide & Bartolini, Fabio & Puddu, Marco & Raggi, Meri, 2013. "Farm/Household-level Simulation Results of Testing Policy and Other Scenarios," Factor Markets Working Papers 166, Centre for European Policy Studies.
  3. Pavel Ciaian & d'Artis Kancs & Sergio Gomez y Paloma, 2010. "Distributional Effects of CAP Subsidies: Micro Evidence from the EU," EERI Research Paper Series EERI_RP_2010_05, Economics and Econometrics Research Institute (EERI), Brussels.
  4. Pavel Ciaian & d'Artis Kancs & Johan F.M. Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments: Single Farm Payments in the European Union," LICOS Discussion Papers 20708, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  5. Gocht, Alexander & Britz, Wolfgang & Ciaian, Pavel & Gomez y Paloma, Sergio, 2011. "EU-wide Distributional Effects of EU Direct Payments Harmonization analyzed with CAPRI," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114624, European Association of Agricultural Economists.
  6. Kilian, Stefan & Salhofer, Klaus, 2009. "Entkoppelte Prämien, Bodenpreise und Wettbewerbsfähigkeit," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 58(3).
  7. Latruffe, Laure & Piet, Laurent & Dupraz, Pierre & Mouël, Chantal Le, 2013. "The influence of agricultural support on sale prices of French farmland: A comparison of different subsidies, accounting for the role of environmental and land regulations," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152373, International Agricultural Trade Research Consortium.
  8. Chatellier, Vincent & Guyomard, Herve, 2012. "The October 2011 Legislative Proposals for CAP Reform: A French Point of View," 126th Seminar, June 27-29, 2012, Capri, Italy 126988, European Association of Agricultural Economists.
  9. Femenia, Fabienne & Gohin, Alexandre & Carpentier, Alain, 2008. "The decoupling of farm programs: Revisiting the wealth effect," 108th Seminar, February 8-9, 2008, Warsaw, Poland 48107, European Association of Agricultural Economists.
  10. Pavel Ciaian & d'Artis Kancs & Johan Swinnen, 2014. "The Impact of the 2013 CAP Reform on Land Capitalization," EERI Research Paper Series EERI RP 2014/07, Economics and Econometrics Research Institute (EERI), Brussels.
  11. Rizov, Marian & Pokrivcak, Jan & Ciaian, Pavel, 2013. "CAP Subsidies and the Productivity of EU Farms," Factor Markets Working Papers 148, Centre for European Policy Studies.
  12. Ciaian, Pavel & Kancs, d'Artis & Swinnen, Johan F.M., 2012. "European Union Land Markets and the Common Agricultural Policy," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126683, International Association of Agricultural Economists.
  13. Feichtinger, Paul & Salhofer, Klaus, 2013. "The Influence of the Common Agricultural Policy and Heterogeneous Land Quality on Land Rent and Land Allocation," Factor Markets Working Papers 149, Centre for European Policy Studies.
  14. Ciaian, Pavel & Kancs, d'Artis & Pokrivcak, Jan, 2013. "Empirical Evidence of the Distributional Effects of the CAP in New EU Member States," Factor Markets Working Papers 170, Centre for European Policy Studies.
  15. Nordin, Martin, 2013. "Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change," Working Papers 2013:40, Lund University, Department of Economics.
  16. Puddu,Marco & Bartolini, Fabio & Viaggi,Davide, 2012. "Simulation of Land Use and Investment Behaviour under Different Policy Scenarios: Results of the extended farm/household model," Factor Markets Working Papers 132, Centre for European Policy Studies.

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