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Analysing the Effect of Decoupling on Agricultural Production: Evidence from Irish Dairy Farms using the Olley and Pakes Approach

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  • Kazukauskas, Andrius
  • Newman, Carol F.
  • Thorne, Fiona S.

Abstract

Recent reform of the Common Agricultural Policy has led to the decoupling of direct payments to farmers from production. This policy change is expected to make farmers’ production decisions more market oriented as their subsidy revenue maximization objectives become profit maximizing objectives. In this paper we explore the impact of decoupling on the productivity of Irish dairy farms using a modified version of Olley and Pakes methodology for productivity estimation. We isolate the effect of decoupling on productivity by controlling for other policy changes that have occurred alongside decoupling. We also explore the effect that uncertainties associated with increased price volatility may have had on farmers’ decisions in the post-decoupled period. Die jüngsten Reformen der Gemeinsamen Agrarpolitik haben dazu geführt, dass Direktzahlungen an Landwirte von der Produktion entkoppelt wurden. Von diesem Politikwandel wird erwartet, dass sich die Produktionsentscheidungen der Landwirte zukünftig weniger an staatlichen Stützungsmaßnahmen und mehr am Ziel der Gewinnmaximierung auf freien Märkten orientieren. In diesem Beitrag untersuchen wir Auswirkungen der Entkopplung auf die Produktivität von irischen Milchviehbetrieben und verwenden dabei eine modifizierte Fassung des Ansatzes von Olley und Pakes zur Schätzung der Produktivitäten. Bei der Wirkungsanalyse zur Entkoppelung wird im Modellansatz berücksichtigt, dass auch noch andere Politikänderungen neben der Entkopplung der Direktzahlungen stattgefunden haben. Im Zusammenhang mit der zunehmenden Preisvolatilität auf Agrarmärkten werden zudem Auswirkungen von Unsicherheit auf die Produktionsentscheidungen der Landwirte in der Nach-Entkoppelungs-Phase herausgearbeitet.

Suggested Citation

  • Kazukauskas, Andrius & Newman, Carol F. & Thorne, Fiona S., 2010. "Analysing the Effect of Decoupling on Agricultural Production: Evidence from Irish Dairy Farms using the Olley and Pakes Approach," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 59(03), pages 1-14, September.
    • Handle: RePEc:ags:gjagec:145290
    DOI: 10.22004/ag.econ.145290
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    Cited by:

    1. Maria Martinez Cillero & Fiona Thorne & Michael Wallace & James Breen & Thia Hennessy, 2018. "The Effects of Direct Payments on Technical Efficiency of Irish Beef Farms: A Stochastic Frontier Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 669-687, September.
    2. Youngjune Kim & Ji Yong Lee, 2020. "Effects of Government Payments on Agricultural Productivity: The Case of South Korea," Sustainability, MDPI, vol. 12(9), pages 1-11, April.
    3. Frick, Fabian & Sauer, Johannes, 2016. "Deregulation and Productivity – Empirical Evidence on Dairy Production," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236032, Agricultural and Applied Economics Association.
    4. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity from Micro-data: The case of EU agriculture," Working papers 144004, Factor Markets, Centre for European Policy Studies.
    5. Andrius Kazukauskas & Carol Newman & Johannes Sauer, 2014. "The impact of decoupled subsidies on productivity in agriculture: a cross-country analysis using microdata," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 327-336, May.
    6. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity by Dynamic Panel Data and Control Function Approaches: A Comparative Evaluation for EU Agriculture," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156104, German Association of Agricultural Economists (GEWISOLA).
    7. Marie-Noelle Duquenne & Maria Tsiapa & Valantis Tsiakos, 2019. "Contribution of the Common Agricultural Policy to agricultural productivity of EU regions during 2004–2012 period," Review of Agricultural, Food and Environmental Studies, Springer, vol. 100(1), pages 47-68, December.
    8. Biagia De Devitiis & Ornella Wanda Maietta, 2015. "Shadow Prices of Human Capital in Agriculture. Evidence from European FADN Regions," CSEF Working Papers 415, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    9. Zheng, Yu & Alexandre, Gohin, 2018. "Agricultural productivity and price volatility in France: a dynamic stochastic partial equilibrium approach," 2018 Annual Meeting, August 5-7, Washington, D.C. 274354, Agricultural and Applied Economics Association.
    10. Ciliberti, Stefano & Frascarelli, Angelo, 2015. "A critical assessment of the implementation of CAP 2014- 2020 direct payments in Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 4(3), pages 1-17, December.
    11. Petrick, Martin & Kloss, Mathias, 2018. "Identifying Agricultural Factor Productivity from Micro-data: A Review of Approaches with an Application to EU Countries," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 67(2), June.
    12. repec:zbw:iamodp:271870 is not listed on IDEAS
    13. Conor M. O'Toole & Carol Newman & Thia Hennessy, 2011. "The role of investment, fundamental Q and financing frictions in agricultural investment decisions: an analysis pre and post financial crisis," Working Papers 1101, Rural Economy and Development Programme,Teagasc.
    14. Marusca De Castris & Daniele Di Gennaro, 2018. "Does agricultural subsidies foster Italian southern farms? A Spatial Quantile Regression Approach," Papers 1803.05659, arXiv.org.

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