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

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  • Rong-Gang Cong
  • Mark Brady

Abstract

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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    Cited by:

    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. Cong, Rong-Gang & Shen, Shaochuan, 2013. "Relationships among Energy Price Shocks, Stock Market, and the Macroeconomy: Evidence from China," MPRA Paper 112211, University Library of Munich, Germany.
    3. 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.
    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. 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.
    8. 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.
    9. 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.
    10. Yungang Tang & Haojie Liao & Ye Wu & Gang Lei, 2024. "Unravelling the bidirectional impact of Chinese agricultural subsidy policy on agricultural efficiency and farmers' income through panel data analysis," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 70(4), pages 165-177.
    11. Isabel Dinis, 2024. "Examining disparities in common agriculture policy direct payments among farming systems: evidence from Portugal," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 12(1), pages 1-23, December.
    12. 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.
    13. Chenyujing Yang & Yuanyuan Zhang & Yanjin Xue & Yongji Xue, 2022. "Toward a Socio-Political Approach to Promote the Development of Circular Agriculture: A Critical Review," IJERPH, MDPI, vol. 19(20), pages 1-18, October.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
    18. 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).

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    JEL classification:

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

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