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Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies

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  • Alexandre Gohin

Abstract

The European Union reformed farm policy in June 2003 towards the decoupling of farm income support instruments. Available impact studies find that this reform reduces production incentives substantially for beef and to a lesser extent for arable crops. However, these studies assume that the previous reform, under Agenda 2000, already decoupled arable crop direct payments to a considerable extent, while beef premiums were linked more closely to production. Our main objective in this paper is to test the sensitivity of these results to this questionable modelling of Agenda 2000 direct payments, which neglects eligibility rules and land market imperfections. Our analysis reveals that the effects of the reform on both arable crop and beef production are always negative, however the Agenda 2000 direct payments are modelled. On the other hand, we show that, when the eligibility rules and land market imperfections are acknowledged, the production reducing effects may be much larger for arable crops than for beef. Policy implications of these results are noted. Copyright 2006 Blackwell Publishing Ltd.

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  • Alexandre Gohin, 2006. "Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(3), pages 415-440.
  • Handle: RePEc:bla:jageco:v:57:y:2006:i:3:p:415-440
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    1. Jacinto F. Fabiosa & John C. Beghin & Fengxia Dong & Amani Elobeid & Frank H. Fuller & Holger Matthey & Simla Tokgoz & Eric Wailes, 2005. "Impact of the European Enlargement and Common Agricultural Policy Reforms on Agricultural Markets: Much Ado about Nothing? The," Center for Agricultural and Rural Development (CARD) Publications 05-wp382, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Frederic Chantreuil & Fabrice Levert & Kevin Hanrahan, 2005. "The Luxembourg agreement reform of the CAP : an analysis using the Ag-Memod composite model," Post-Print hal-01594021, HAL.
    3. Duvivier, Romain & Gaspart, Frederic & Frahan, Bruno Henry de, 2005. "A Panel Data Analysis of the Determinants of Farmland Price: An Application to the Effects of the 1992 Cap Reform in Belgium," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24577, European Association of Agricultural Economists.
    4. Balkhausen, Oliver & Banse, Martin & Grethe, Harald & Nolte, Stephan, 2005. "Modelling the Effects of Partial Decoupling on Crop and Fodder Area And Ruminant Supply in the EU: Current State and Outlook," 89th Seminar, February 2-5, 2005, Parma, Italy 231832, European Association of Agricultural Economists.
    5. Chantreuil, Frédéric & Levert, Fabrice & Hanrahan, Kevin, 2005. "The Luxembourg Agreement Reform of the CAP: an Analysis Using the AG-MEMOD Composite Model," 89th Seminar, February 2-5, 2005, Parma, Italy 232590, European Association of Agricultural Economists.
    6. Ciaian, Pavel & Swinnen, Johan F.M., 2005. "Market Imperfections and Agricultural Policy Effects on Structural Change and Competitiveness in an Enlarged EU," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24463, European Association of Agricultural Economists.
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