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Multifunctional agriculture: The effect of non-public good on socially optimal policies

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  • Ollikainen, Markku
  • Lankoski, Jussi E.

Abstract

We develop a general framework for multifunctional agriculture, which includes not only public goods but also rural viability as a non-public good item. We contribute to the literature in two ways. First, we demonstrate how the broader definition of multifunctional agriculture differs from the agri-environmental multifunctionality, and how agri-environmental policy should be reformed to include these aspects. We show that rural viability entails adjusting fertilizer tax and buffer strip subsidy below their first-best Pigouvian levels to reflect the direct and indirect employment effects of agricultural production. Moreover, we show that when non-agricultural land use is present, an additional, non-agricultural instrument is needed to adjust the amount of land allocated to agriculture to its optimal level. In a parametric model calibrated to Finnish agricultural conditions and Finnish valuation of agri-environmental amenities and rural viability, we assess how the socially optimal provision of non-public good multifunctionality relates the socially optimal agri-environmental multifunctionality.

Suggested Citation

  • Ollikainen, Markku & Lankoski, Jussi E., 2005. "Multifunctional agriculture: The effect of non-public good on socially optimal policies," Discussion Papers 11866, MTT Agrifood Research Finland.
  • Handle: RePEc:ags:mttfdp:11866
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    1. Lichtenberg, Erik, 2002. "Agriculture and the environment," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 23, pages 1249-1313 Elsevier.
    2. Jussi Lankoski & Markku Ollikainen, 2003. "Agri-environmental externalities: a framework for designing targeted policies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 51-75, March.
    3. Arild Vatn, 2002. "Multifunctional agriculture: some consequences for international trade regimes," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(3), pages 309-327, July.
    4. Chantal Le Mouel, 2004. "Impacts of alternative agricultural income support schemes on multiple policy goals," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 125-148, June.
    5. Anderson, Kym, 2000. "Agriculture's 'multifunctionality' and the WTO," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(3), September.
    6. Jeffrey M. Peterson & Richard N. Boisvert & Harry de Gorter, 2002. "Environmental policies for a multifunctional agricultural sector in open economies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(4), pages 423-443, December.
    7. Yrjola, Tapani & Kola, Jukka, 2004. "Consumer Preferences Regarding Multifunctional Agriculture," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 7(02).
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    Cited by:

    1. Arovuori, Kyösti & Kola, Jukka, 2006. "Multifunctional Policy Measures: Farmers' Choice," 2006 Annual meeting, July 23-26, Long Beach, CA 21400, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Sasaki, Hiroki, 2010. "Relationships between Agricultural policies and Environmental Effects in Japan: An Environmental-Economic Integrated Model Approach," 120th Seminar, September 2-4, 2010, Chania, Crete 109399, European Association of Agricultural Economists.
    3. Heikki Lehtonen & Jussi Lankoski & Jyrki Niemi, 2005. "Evaluating the Impact of Alternative Policy Scenarios on Multifunctionality: A Case Study of Finland," ENARPRI Working Papers 013, ENARPRI (European Network of Agricultural and Rural Policy Research Institutes).
    4. Lehtonen, Heikki & Lankoski, Jussi E. & Niemi, Jyrki S. & Ollikainen, Markku, 2005. "The Impacts of Alternative Policy Scenarios on Multifunctionality," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24459, European Association of Agricultural Economists.
    5. Casamatta, Georges & Rausser, Gordon & Simon, Leo, 2011. "Optimal taxation with joint production of agriculture and rural amenities," Resource and Energy Economics, Elsevier, vol. 33(3), pages 544-553, September.
    6. Arovuori, Kyösti & Kola, Jukka, 2005. "Policies and Measures for Multifunctional Agriculture: Experts' Insight," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 8(03).
    7. Sinabell, Franz & Schmid, Erwin, 2006. "On the Choice of Cost and Effectiveness Indicators in the Context of the European Water Policy," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25394, International Association of Agricultural Economists.
    8. Arovuori, Kyösti & Kola, Jukka, 2005. "Multifunctional Policy Measures for Multifunctional Agriculture," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24771, European Association of Agricultural Economists.

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    Keywords

    Agricultural and Food Policy;

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