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Causes of Multifunctionality: Externalities or Political Pressure?

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  • Baylis, Katherine R.
  • Casamatta, Georges
  • Peplow, Stephen
  • Rausser, Gordon C.
  • Simon, Leo K.

Abstract

The EU has argued that some agricultural subsidies are needed to provide the optimal amount of externalities (both positive and negative) produced by agriculture. The argument is that agriculture is "multifunctional" and externalities such as rural development and landscape would be underproduced, while some forms of pollution (such as nitrogen runoff) would be overproduced without government intervention. Meanwhile, the United States has raised the concern that multifunctionality is primarily an argument to transfer income to producers. In this paper, we discuss the motivation for the EU agri-environmental measures and empirically test for those underlying causes. We find that the programs are not targeted at those regions with the highest environmental need, but neither are they purely a substitute for traditional forms of agricultural subsidies. Demand for general environmental expenditure does influence agri-environmental expenditure as well, as does political structure.

Suggested Citation

  • Baylis, Katherine R. & Casamatta, Georges & Peplow, Stephen & Rausser, Gordon C. & Simon, Leo K., 2005. "Causes of Multifunctionality: Externalities or Political Pressure?," 2005 Annual meeting, July 24-27, Providence, RI 19297, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19297
    DOI: 10.22004/ag.econ.19297
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    Cited by:

    1. Baylis, Kathy & Peplow, Stephen & Rausser, Gordon & Simon, Leo, 2008. "Agri-environmental policies in the EU and United States: A comparison," Ecological Economics, Elsevier, vol. 65(4), pages 753-764, May.
    2. Bertoni, Danilo & Olper, Alessandro, . "The Political Economy Of Agri-Environmental Measures: An Empirical Assessment At The Eu Regional Level," APSTRACT: Applied Studies in Agribusiness and Commerce, AGRIMBA, vol. 6(3-4), pages 1-12.
    3. Bertoni, Danilo & Olper, Alessandro, 2008. "The Political Economy of EU Agri-environmental measures: An empirical Assessment at the Regional Level," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44435, European Association of Agricultural Economists.

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