Evaluating the Effects of Decoupled Payments under Output and Price Uncertainty
This paper examines the effects of decoupling policies on Greek cotton production under the hypothesis that producers face uncertainty about output price and quantity. Using our estimation results we simulate the effects on cotton production under four alternative policy scenarios: the ‘Old’ CAP regime (i.e. the policy practiced until 2005), the Mid Term Review regime, a fully decoupled policy regime and a free trade-no policy scenario. Our results indicate the decoupled payment will have two contradictious effects on risk aversion. Producers become less risk averse through the wealth effect but more risk averse because of the increased output variance. The overall result of these two effects depends on the degree of risk aversion by farmers. We found that when the degree of risk aversion is high the wealth effect is positive. However, in the case of low risk aversion, the wealth disappears in practice and as a result the decoupled payments become production neutral.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Femenia, Fabienne & Gohin, Alexandre & Carpentier, Alain, 2008.
"The decoupling of farm programs: Revisiting the wealth effect,"
108th Seminar, February 8-9, 2008, Warsaw, Poland
48107, European Association of Agricultural Economists.
- Fabienne Femenia & Alexandre Gohin & Alain Carpentier, 2010. "The Decoupling of Farm Programs: Revisiting the Wealth Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 836-848.
- Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
- David A. Hennessy, 1998.
"The Production Effects of Agricultural Income Support Policies under Uncertainty,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
- Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers Archive 1207, Iowa State University, Department of Economics.
- Katranidis, Stelios D. & Kotakou, Christina A., 2008. "Are CAP Decoupling Policies Really Production Neutral?," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44184, European Association of Agricultural Economists.
- Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
- Teresa Serra & David Zilberman & Jose Gil & Allen Featherstone, 2009. "The effects of decoupling on land allocation," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2323-2333.
- Teresa Serra & David Zilberman & Barry K. Goodwin & Allen Featherstone, 2006. "Effects of decoupling on the mean and variability of output," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 269-288, September.
When requesting a correction, please mention this item's handle: RePEc:mcd:mcddps:2010_04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Panagiotidis)
If references are entirely missing, you can add them using this form.