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Multifunctionality And Non-Agricultural Supply Of Public Goods

Listed author(s):
  • le Cotty, Tristan
  • Voituriez, Tancrede
Registered author(s):

    When public goods are joint outputs of agricultural production, there is a trade-off between agricultural and non-agricultural provision of the public good. The principle of minimal price distortion in the reform of agricultural policies has led to a theoretical recommendation that public goods, if under-provided at agricultural free market level, should be promoted through non agricultural policies instead of agricultural policies. We show that the economies of scope between the agricultural production and the joint public good play a key role in determining the optimal way of providing this latter. If the policy designed is a non-agricultural policy, the production cost of the public good is higher than with an agricultural policy. If the policy designed is an agricultural policy, the production cost is lower but generates market effects. Under the assumption of strictly positive economies of scope, we show that the optimal policy is a mix of agricultural and non-agricultural policy. We confirm this result in the two-country case, demonstrating the optimal level of agricultural support for public good provision is strictly positive and lower than in the case of one country.

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    Paper provided by International Association of Agricultural Economists in its series 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa with number 25850.

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    Date of creation: 2003
    Handle: RePEc:ags:iaae03:25850
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    1. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    2. Giancarlo Moschini, 1989. "Normal Inputs and Joint Production with Allocatable Fixed Factors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 1021-1024.
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