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How to Design a Targeted Agricultural Subsidy System: Efficiency or Equity?


  • Rong-Gang Cong
  • Mark Brady


In this paper we appraise current agricultural subsidy policy in the EU. Several sources of its inefficiency are identified: it is inefficient for supporting farmers’ incomes or guaranteeing food security, and irrational transfer payments decoupled from actual performance that may be negative for environmental protection, social cohesion, etc. Based on a simplified economic model, we prove that there is “reverse redistribution” in the current tax-subsidy system, which cannot be avoided. To find a possible way to distribute subsidies more efficiently and equitably, several alternative subsidy systems (the pure loan, the harvest tax and the income contingent loan) are presented and examined.

Suggested Citation

  • Rong-Gang Cong & Mark Brady, 2012. "How to Design a Targeted Agricultural Subsidy System: Efficiency or Equity?," PLOS ONE, Public Library of Science, vol. 7(8), pages 1-12, August.
  • Handle: RePEc:plo:pone00:0041225
    DOI: 10.1371/journal.pone.0041225

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    1. Cong, Rong-Gang & Termansen, Mette, 2016. "A bio-economic analysis of a sustainable agricultural transition using green biorefinery," MPRA Paper 112189, University Library of Munich, Germany.
    2. Matthew C. LaFevor & Alexandra G. Ponette-González & Rebecca Larson & Leah M. Mungai, 2021. "Spatial Targeting of Agricultural Support Measures: Indicator-Based Assessment of Coverages and Leakages," Land, MDPI, vol. 10(7), pages 1-17, July.
    3. Cong, Rong-Gang & Stefaniak, Irena & Madsen, Bjarne & Dalgaard, Tommy & Jensen, Jørgen Dejgård & Nainggolan, Doan & Termansen, Mette, 2017. "Where to implement local biotech innovations? A framework for multi-scale socio-economic and environmental impact assessment of Green Bio-Refineries," Land Use Policy, Elsevier, vol. 68(C), pages 141-151.
    4. Bojnec, Štefan & Fertő, Imre, 2022. "Do different types of Common Agricultural Policy subsidies promote farm employment?," Land Use Policy, Elsevier, vol. 112(C).
    5. Cong, Rong-Gang & Ekroos, Johan & Smith, Henrik G. & Brady, Mark V., 2016. "Optimizing intermediate ecosystem services in agriculture using rules based on landscape composition and configuration indices," Ecological Economics, Elsevier, vol. 128(C), pages 214-223.
    6. Chen, Lihong & Cong, Rong-Gang & Shu, Bangrong & Mi, Zhi-Fu, 2017. "A sustainable biogas model in China: The case study of Beijing Deqingyuan biogas project," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 773-779.
    7. Cong, Rong-Gang & Smith, Henrik G. & Olsson, Ola & Brady, Mark, 2014. "Managing ecosystem services for agriculture: Will landscape-scale management pay?," Ecological Economics, Elsevier, vol. 99(C), pages 53-62.
    8. Han, Rong & Yu, Bi-Ying & Tang, Bao-Jun & Liao, Hua & Wei, Yi-Ming, 2017. "Carbon emissions quotas in the Chinese road transport sector: A carbon trading perspective," Energy Policy, Elsevier, vol. 106(C), pages 298-309.
    9. Zhang, Yue-Jun & Wang, Ao-Dong & Tan, Weiping, 2015. "The impact of China's carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises," Energy Policy, Elsevier, vol. 86(C), pages 176-185.
    10. Xu, Jiuping & Yang, Xin & Tao, Zhimiao, 2015. "A tripartite equilibrium for carbon emission allowance allocation in the power-supply industry," Energy Policy, Elsevier, vol. 82(C), pages 62-80.
    11. Zhi-Fu Mi & Yi-Ming Wei & Bing Wang & Jing Meng & Zhu Liu & Yuli Shan & Jingru Liu & Dabo Guan, 2017. "Socioeconomic impact assessment of China's CO2 emissions peak prior to 2030," CEEP-BIT Working Papers 103, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    12. Jana Vavřina & Kamila Růžičková & Dana Martinovičová, 2012. "The CAP reform beyond 2013: the economic performance of agricultural enterprises within the Visegrad Group," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(7), pages 451-462.
    13. Drechsler, Martin & Wätzold, Frank, 2020. "Biodiversity conservation in a dynamic world may lead to inefficiencies due to lock-in effects and path dependence," Ecological Economics, Elsevier, vol. 173(C).
    14. Rong-Gang Cong & Mette Termansen & Mark V. Brady, 2017. "Managing soil natural capital: a prudent strategy for adapting to future risks," Annals of Operations Research, Springer, vol. 255(1), pages 439-463, August.

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    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General


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