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An integer programming dynamic farm-household model to evaluate the impact of agricultural policy reforms on farm investment behaviour

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  • Viaggi, Davide
  • Raggi, Meri
  • Gomez y Paloma, Sergio

Abstract

We develop a multi-objective farm-household dynamic integer programming model to simulate investment behaviour in different policy and price scenarios, with a particular focus on the decoupling of the Common Agricultural Policy (CAP). The model takes into account the characteristics of individual assets, including ageing and fixity through the explicit consideration of transaction costs. A case study application in the context of arable farming in Northern Italy is provided as an example. The results emphasise different patterns of reaction of different farm-household types over time, as an effect of the varying opportunity costs of resources and initial asset endowments. Overall, this application highlights the potentialities and limits of the methodology. In particular, the approach proved to be effective in providing a variety of results depending on the individual features of each farm-household, such as the differences between: (a) a 'no reaction' attitude; (b) an adaptation of farm activity and assets; and (c) a radical reaction pattern guided by high-income alternatives to farming. This highlights the potential of this tool as a generator of ideas and working hypotheses. We argue that, in view of the further developments of the CAP, the use of instruments able to account for multiple objectives, dynamics and investment choices will become even more relevant in the analysis of EU agricultural policy.

Suggested Citation

  • Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2010. "An integer programming dynamic farm-household model to evaluate the impact of agricultural policy reforms on farm investment behaviour," European Journal of Operational Research, Elsevier, vol. 207(2), pages 1130-1139, December.
  • Handle: RePEc:eee:ejores:v:207:y:2010:i:2:p:1130-1139
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    References listed on IDEAS

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    1. Michael T. Wallace & Joan E. Moss, 2002. "Farmer Decision-Making with Conflicting Goals: A Recursive Strategic Programming Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(1), pages 82-100.
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    8. van Asseldonk, M. A. P. M. & Huirne, R. B. M. & Dijkhuizen, A. A. & Beulens, A. J. M., 1999. "Dynamic programming to determine optimum investments in information technology on dairy farms," Agricultural Systems, Elsevier, vol. 62(1), pages 17-28, October.
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    Citations

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    Cited by:

    1. Bartolini, Fabio & Viaggi, Davide, 2011. "Factors Affecting the Impact of CAP Scenarios on Farm Structure: An Analysis Based on Stated Intentions," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114244, European Association of Agricultural Economists.
    2. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    3. Viaggi, D. & Bartolini, Fabio & Puddu, M. & Raggi, M., 2013. "Impact of post-2013 CAP reform on land markets: evidence from farm surveys and farm-level modelling," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152376, International Agricultural Trade Research Consortium.
    4. Pletichová, Dobroslava & Gebeltová, Zdeňka, 2015. "Evaluation of the Effect of Subsidies on the Production Capability of Land in Selected Regions of the Czech Republic," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 7(4), December.
    5. Wishon, C. & Villalobos, J.R. & Mason, N. & Flores, H. & Lujan, G., 2015. "Use of MIP for planning temporary immigrant farm labor force," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 25-33.
    6. Marconi, V. & Raggi, M. & Viaggi, D. & Lefebvre, M. & Gomez y Paloma, Sergio, 2015. "The impact of the 2013 Common Agricultural Policy reform on farmer's investment decisions: an ex-ante evaluation," 2015 Conference, August 9-14, 2015, Milan, Italy 212225, International Association of Agricultural Economists.
    7. 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.
    8. Viaggi, Davide & Raggi, Meri & Puddu, Marco & Bartolini, Fabio, 2013. "Farm/Household-level Simulation Results of Testing Policy and Other Scenarios," Working Papers 157113, Factor Markets, Centre for European Policy Studies.
    9. Ridier, Aude & Chaib, Karim & Roussy, Caroline, 2016. "A Dynamic Stochastic Programming model of crop rotation choice to test the adoption of long rotation under price and production risks," European Journal of Operational Research, Elsevier, vol. 252(1), pages 270-279.
    10. Elisa Gatto & Alba Marino & Guido Signorino, 2013. "Biodiversity and risk management in agriculture: what do we learn from CAP reforms? A farm-level analysis," ERSA conference papers ersa13p805, European Regional Science Association.
    11. repec:eee:agisys:v:159:y:2018:i:c:p:111-125 is not listed on IDEAS
    12. Cilierti, Stefano & Frascarelli, Angelo, 4. "Direct payments 2014-2020: a qualitative method for evaluating resource allocation scenarios in Italy," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L’Informatore Agrario, issue 4.
    13. Gebeltova, Zdenka & Pletichova, D., 2012. "Proposal of the Creation of Resources for the Maintenance of the Production Capability of the Agricultural Land Fund by Way of Tax Savings," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(4), December.

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