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Decoupled Payments and the Localization of Activities

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  • Daniel, Karine
  • Kilkenny, Maureen

Abstract

This article considers the impacts of (de)coupled farm sector support on the locations of farming and agro-industrial activity. An economic geography model is developed which has two types of regions, one with extensive agricultural production (rural), the other with intensive farming that is more densely populated (urban). The farm and agro-industrial sectors are vertically linked. A service sector that is not directly linked to either basic industry is also explicit. We show that coupled and decoupled subsidies affect the spatial distribution of farming, industry, and service sector activity. Support that is provided to all farmers regardless of crop, thus semi-decoupled, increases spatial agglomeration. Support targeted to farmers of particular crops, especially rural comparative advantage crops, favors increased farming in rural areas but spatial agglomeration of non-farm activity still occurs. This latter targeting approach is used in the European Union.

Suggested Citation

  • Daniel, Karine & Kilkenny, Maureen, 2002. "Decoupled Payments and the Localization of Activities," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24942, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae02:24942
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    File URL: http://purl.umn.edu/24942
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    References listed on IDEAS

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    1. repec:adr:anecst:y:1997:i:47:p:06 is not listed on IDEAS
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    3. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    4. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    5. Maureen Kilkenny, 1995. "Transport Costs and Rural Development," Food and Agricultural Policy Research Institute (FAPRI) Publications 95-wp133, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    6. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, pages 335-351.
    7. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    location; agriculture; economic geography; decoupling; Agricultural Finance; R12; R58; Q18;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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