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

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

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.

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Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 207 (2010)
Issue (Month): 2 (December)
Pages: 1130-1139

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Handle: RePEc:eee:ejores:v:207:y:2010:i:2:p:1130-1139
Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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  1. Heikkinen, T. & Pietola, K., 2009. "Investment and the dynamic cost of income uncertainty: The case of diminishing expectations in agriculture," European Journal of Operational Research, Elsevier, vol. 192(2), pages 634-646, January.
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  4. 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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  7. Janssen, Sander & van Ittersum, Martin K., 2007. "Assessing farm innovations and responses to policies: A review of bio-economic farm models," Agricultural Systems, Elsevier, vol. 94(3), pages 622-636, June.
  8. David J. Pannell, 1996. "Lessons from a Decade of Whole-Farm Modeling in Western Australia," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(3), pages 373-383.
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  10. Bohle, Carlos & Maturana, Sergio & Vera, Jorge, 2010. "A robust optimization approach to wine grape harvesting scheduling," European Journal of Operational Research, Elsevier, vol. 200(1), pages 245-252, January.
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