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Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)

Author

Listed:
  • BOULANGER Pierre

    (European Commission – JRC Seville)

  • PHILIPPIDIS George

    (Aragonese Agency for Research and Development (ARAID) and Wageningen University & Research)

  • URBAN Kirsten

    (Hohenheim University)

Abstract

In 2020, decoupled payments will represent about 42% of the CAP budget (green payments excluded). This report assesses potential effects of European decoupled payments on farmers' production decisions, prior to a sensitivity analysis of different coupling factors using the Modular Applied GeNeral Equilibrium Tool (MAGNET). Scientific literature reveals different coupling channels such as capitalisation in land value, farmers' risk behaviour, credit accessibility, uncertainty about future policies and labour allocation through which European decoupled payments influence farm choices and thus output. For each of these channels the relevant literature introducing theoretical and empirical assessments is evaluated with the aim to derive parameters that improve the representation of decoupled payments in economic simulation models. Within MAGNET, the traditional representation of decoupled payments is a subsidy to the land factor. Nevertheless it appears that the most suitable approach seems to split decoupled payments value into two components, capitalized into the land factor on the one hand, distributed across all factors of production on the other hand. A sensitivity analysis concludes that if one assumes a "degree" of coupling, it does have some implication for output and price results when conducting policy analysis.

Suggested Citation

  • BOULANGER Pierre & PHILIPPIDIS George & URBAN Kirsten, 2017. "Assessing potential coupling factors of European decoupled payments with the Modular Agricultural GeNeral Equilibrium Tool (MAGNET)," JRC Working Papers JRC104276, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc104276
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    References listed on IDEAS

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    1. Oliver Balkhausen & Martin Banse & Harald Grethe, 2008. "Modelling CAP Decoupling in the EU: A Comparison of Selected Simulation Models and Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 57-71, February.
    2. Phoebe Koundouri & Marita Laukkanen & Sami Myyrä & Céline Nauges, 2009. "The effects of EU agricultural policy changes on farmers' risk attitudes," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(1), pages 53-77, March.
    3. Zein Kallas & Teresa Serra & Jos頠 M. Gil, 2012. "Effects of policy instruments on farm investments and production decisions in the Spanish COP sector," Applied Economics, Taylor & Francis Journals, vol. 44(30), pages 3877-3886, October.
    4. Barry K. Goodwin, 2009. "Payment Limitations and Acreage Decisions under Risk Aversion: A Simulation Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 19-41.
    5. Martin Nordin, 2014. "Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(3), pages 616-636, September.
    6. Alexandre Gohin, 2006. "Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(3), pages 415-440, September.
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    Cited by:

    1. Pierre Boulanger & Kirsten Boysen-Urban & George Philippidis, 2021. "European Union Agricultural Support ‘Coupling’ in Simulation Modelling: Measuring the Sustainability Impacts," Sustainability, MDPI, Open Access Journal, vol. 13(6), pages 1-17, March.

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    More about this item

    Keywords

    Economic analysis; impact assessment; Common Agricultural Policy; agricultural trade; agricultural markets; modelling tools; database;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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