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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
    DOI: 10.22004/ag.econ.11866
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    1. 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.
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    Cited by:

    1. Lehtonen, Heikki & Lankoski, Jussi E. & Niemi, Jyrki S., 2005. "Evaluating the Impact of Alternative Agricultural Policy Scenarios on Multifunctionality: A Case Study of Finland," ENARPRI Working Papers 25137, European Network of Agricultural and Rural Policy Research Institutes (ENARPRI).
    2. 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).
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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).
    8. 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, vol. 8(3), pages 1-31.
    9. 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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