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Cap reform: modelling supply response subject to the land set‐aside

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  • V. Eldon Ball
  • Jean‐Christophe Bureau
  • Kelly Eakin
  • Agapi Somwaru

Abstract

This paper uses duality theory to develop a model of European Community agriculture. The model is used to investigate the impact of the land set‐aside provision of the recent package of reforms of the Common Agricultural Policy. We assume that producers chose output and variable input levels that maximize difference between revenue and variable cost. By including first‐order conditions for the allocation of land across its uses, we impose that the observed allocations are profit‐maximizing allocations. To overcome the problem of incorporating many outputs into an estimable production structure, we imposed a priori the restriction that the technology was weakly separable in major categories of outputs. With this restriction, it was possible to model production decisions in stages using consistent aggregates in the latter stages.

Suggested Citation

  • V. Eldon Ball & Jean‐Christophe Bureau & Kelly Eakin & Agapi Somwaru, 1997. "Cap reform: modelling supply response subject to the land set‐aside," Agricultural Economics, International Association of Agricultural Economists, vol. 17(2-3), pages 277-288, December.
    • Handle: RePEc:bla:agecon:v:17:y:1997:i:2-3:p:277-288
    DOI: 10.1111/j.1574-0862.1997.tb00479.x
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    References listed on IDEAS

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    1. V. Eldon Ball, 1988. "Modeling Supply Response in a Multiproduct Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(4), pages 813-825.
    2. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    3. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
    4. V.E. Ball & J.C. Bureau & J.P. Butault & H.P. Witzke, 1993. "The stock of capital in European Community agriculture," Post-Print hal-01072680, HAL.
    5. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    6. Ball, V Eldon, et al, 1993. "The Stock of Capital in European Community Agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 20(4), pages 437-450.
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    Cited by:

    1. Louhichi, Kamel & Ciaian, Pavel & Espinosa, Maria & Colen, Liesbeth & Perni, Angel & Gomez y Paloma, Sergio, 2015. "EU-wide individual Farm Model for CAP Analysis (IFM-CAP): Application to Crop Diversification Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212155, International Association of Agricultural Economists.
    2. Arnade, Carlos Anthony & Kelch, David R. & Leetmaa, Susan E., 2002. "Supply Response In France, Germany, And The Uk: Technology And Price," 2002 Annual meeting, July 28-31, Long Beach, CA 19702, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2006. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 351-364.
    4. Hughes, Neal & Soh, Wei Ying & Lawson, Kenton & Lu, Michael, 2022. "Improving the performance of micro-simulation models with machine learning: The case of Australian farms," Economic Modelling, Elsevier, vol. 115(C).
    5. Ball, V. Eldon & Moss, Charles B. & Erickson, Kenneth W. & Nehring, Richard F., 2003. "Modeling Supply Response In A Multiproduct Framework Revisited: The Nexus Of Empirics And Economics," 2003 Annual meeting, July 27-30, Montreal, Canada 21981, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. V. Ball & Jean-Christophe Bureau & Jean-Pierre Butault & Richard Nehring, 2001. "Levels of Farm Sector Productivity: An International Comparison," Journal of Productivity Analysis, Springer, vol. 15(1), pages 5-29, January.
    7. Louhichi, Kamel & Ciaian, Pavel & Espinosa, Maria & Colen, Liesbeth & Perni, Angel & Gomez y Paloma, Sergio, 2015. "Farm-level economic impacts of EU-CAP greening measures," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205309, Agricultural and Applied Economics Association.
    8. Thomas, Alban & Chakir, Raja, 2020. "Unintended consequences of environmental policies: the case of set-aside and agricultural intensification," TSE Working Papers 20-1066, Toulouse School of Economics (TSE).
    9. Fezzi, Carlo & Bateman, Ian J., 2009. "Structural Agricultural Land Use Modelling," 2009 Conference, August 16-22, 2009, Beijing, China 51423, International Association of Agricultural Economists.
    10. Sckokai, Paolo, 2001. "The Common Agricultural Policy In Econometric Models," Working Papers 14800, National Institute of Agricultural Economics, Italy - INEA, Osservatorio Sulle Politiche Agricole dell'UE.

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