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How to Design a Targeted Agricultural Subsidy System: Efficiency or Equity?

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  • Rong-Gang, Cong
  • Mark, Brady

Abstract

In this paper we appraise current agricultural subsidy policy in the EU. Several sources of its inefficiency are identified: it is inefficient for supporting farmers’ incomes or guaranteeing food security, and irrational transfer payments decoupled from actual performance that may be negative for environmental protection, social cohesion, etc. Based on a simplified economic model, we prove that there is ‘‘reverse redistribution’’ in the current tax-subsidy system, which cannot be avoided. To find a possible way to distribute subsidies more efficiently and equitably, several alternative subsidy systems (the pure loan, the harvest tax and the income contingent loan) are presented and examined.

Suggested Citation

  • Rong-Gang, Cong & Mark, Brady, 2012. "How to Design a Targeted Agricultural Subsidy System: Efficiency or Equity?," MPRA Paper 42481, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42481
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    References listed on IDEAS

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    1. repec:cep:sticas:/124 is not listed on IDEAS
    2. Cong, Rong-Gang & Wei, Yi-Ming, 2010. "Potential impact of (CET) carbon emissions trading on China’s power sector: A perspective from different allowance allocation options," Energy, Elsevier, vol. 35(9), pages 3921-3931.
    3. Shah, Amita, 2006. "Exploring sustainable production systems for agriculture: Implications for employment and investment under north-south trade scenario," Ecological Economics, Elsevier, vol. 59(2), pages 237-241, September.
    4. Mark Brady & Konrad Kellermann & Christoph Sahrbacher & Ladislav Jelinek, 2009. "Impacts of Decoupled Agricultural Support on Farm Structure, Biodiversity and Landscape Mosaic: Some EU Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 563-585, September.
    5. 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.
    6. Beard, Nick & Swinbank, Alan, 2001. "Decoupled payments to facilitate CAP reform," Food Policy, Elsevier, vol. 26(2), pages 121-145, April.
    7. Magnani, Elisabetta, 2000. "The Environmental Kuznets Curve, environmental protection policy and income distribution," Ecological Economics, Elsevier, vol. 32(3), pages 431-443, March.
    8. Zahrnt, Valentin, 2009. "Public Money for Public Goods: Winners and Losers from CAP Reform," ECIPE Working Papers 51300, European Centre for International Political Economy (ECIPE).
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    Citations

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    Cited by:

    1. Cong, Rong-Gang & Ekroos, Johan & Smith, Henrik G. & Brady, Mark V., 2016. "Optimizing intermediate ecosystem services in agriculture using rules based on landscape composition and configuration indices," Ecological Economics, Elsevier, vol. 128(C), pages 214-223.
    2. Chen, Lihong & Cong, Rong-Gang & Shu, Bangrong & Mi, Zhi-Fu, 2017. "A sustainable biogas model in China: The case study of Beijing Deqingyuan biogas project," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 773-779.
    3. Cong, Rong-Gang & Smith, Henrik G. & Olsson, Ola & Brady, Mark, 2014. "Managing ecosystem services for agriculture: Will landscape-scale management pay?," Ecological Economics, Elsevier, vol. 99(C), pages 53-62.
    4. Han, Rong & Yu, Bi-Ying & Tang, Bao-Jun & Liao, Hua & Wei, Yi-Ming, 2017. "Carbon emissions quotas in the Chinese road transport sector: A carbon trading perspective," Energy Policy, Elsevier, vol. 106(C), pages 298-309.
    5. Zhang, Yue-Jun & Wang, Ao-Dong & Tan, Weiping, 2015. "The impact of China's carbon allowance allocation rules on the product prices and emission reduction behaviors of ETS-covered enterprises," Energy Policy, Elsevier, vol. 86(C), pages 176-185.
    6. Xu, Jiuping & Yang, Xin & Tao, Zhimiao, 2015. "A tripartite equilibrium for carbon emission allowance allocation in the power-supply industry," Energy Policy, Elsevier, vol. 82(C), pages 62-80.
    7. Zhi-Fu Mi & Yi-Ming Wei & Bing Wang & Jing Meng & Zhu Liu & Yuli Shan & Jingru Liu & Dabo Guan, 2017. "Socioeconomic impact assessment of China's CO2 emissions peak prior to 2030," CEEP-BIT Working Papers 103, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    8. Jana Vavřina & Kamila Růžičková & Dana Martinovičová, 2012. "The CAP reform beyond 2013: the economic performance of agricultural enterprises within the Visegrad Group," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(7), pages 451-462.
    9. Rong-Gang Cong & Mette Termansen & Mark V. Brady, 2017. "Managing soil natural capital: a prudent strategy for adapting to future risks," Annals of Operations Research, Springer, vol. 255(1), pages 439-463, August.

    More about this item

    Keywords

    agricultural economics;

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General

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