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Effects on Investment of the 2003 CAP Reform: A Household Production Model for Dutch Dairy Farms

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  • Peerlings, Jack H.M.

Abstract

This paper develops a non-separable household production model capable of analysing the effects of the 2003 CAP reform, and especially EU farm payments, on individual Dutch dairy farms. Model results show that the 2003 CAP reform farm payments do not fully compensate the income loss caused by the milk price decrease. This implies that savings, and therefore, investment decreases. Investment shifts away from on-farm investment to off-farm investment. On-farm investment in milk quotas falls compared to investment in capital and land because the shadow price of milk quotas decreases relatively to the shadow prices of land and capital.

Suggested Citation

  • Peerlings, Jack H.M., 2005. "Effects on Investment of the 2003 CAP Reform: A Household Production Model for Dutch Dairy Farms," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24649, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae05:24649
    DOI: 10.22004/ag.econ.24649
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    References listed on IDEAS

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    1. J. Taylor & Irma Adelman, 2003. "Agricultural Household Models: Genesis, Evolution, and Extensions," Review of Economics of the Household, Springer, vol. 1(1), pages 33-58, January.
    2. K. Sato, 1967. "A Two-Level Constant-Elasticity-of-Substitution Production Function," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(2), pages 201-218.
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