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How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?

Author

Listed:
  • Frédéric Courleux
  • Hervé Guyomard
  • Fabrice Levert
  • Laurent Piet

Abstract

The 2003 Common Agricultural Policy (CAP) reform radically changes the way the European Union (EU) supports its agricultural sector by decoupling direct payments. Production is no longer required to get the payment attached to Single Farm Payment (SFP) entitlements. However, the new scheme maintains a specific link between payments and hectares; in addition, SFP entitlements can be exchanged among farmers. These features question the way SFP entitlements should be regarded, hence modelled, i.e., as lump-sum transfers, area payments or… something else. We develop a microeconomic analytical framework which shows that the answer crucially depends on the total number of entitlements which are initially made available relative to the number of hectares, more specifically the number of cultivated hectares in a zero support regime, the number of cultivated hectares in a policy support regime trough per-hectare direct aids, and the number of cultivated or idled hectares in a policy regime where support is granted through direct aids per hectare and production is not required.

Suggested Citation

  • Frédéric Courleux & Hervé Guyomard & Fabrice Levert & Laurent Piet, 2008. "How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?," Working Papers SMART - LERECO 08-01, INRA UMR SMART-LERECO.
  • Handle: RePEc:rae:wpaper:200801
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    References listed on IDEAS

    as
    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. Schmid, Erwin & Sinabell, Franz & Hofreither, Markus F., 2007. "Phasing out of environmentally harmful subsidies: Consequences of the 2003 CAP reform," Ecological Economics, Elsevier, vol. 60(3), pages 596-604, January.
    3. Bascou, Pierre & Londero, Pierluigi & Munch, Wolfgang, 2004. "Reform and Adjustment in the European Union: The 2003 Reform of the Common Agricultural Policy and Enlargement," IAPRAP\IATRC Summer Symposium, Adjusting to Domestic and International Agricultural Reform in Industrial Countries, June 6-7, 2004, Philadelphia, PA 15769, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    4. Balkhausen, Oliver & Banse, Martin & Grethe, Harald & Nolte, Stephan, 2005. "Modelling the Effects of Partial Decoupling on Crop and Fodder Area And Ruminant Supply in the EU: Current State and Outlook," 89th Seminar, February 2-5, 2005, Parma, Italy 231832, European Association of Agricultural Economists.
    5. Binfield, Julian C.R. & Westhoff, Patrick C. & Young, Robert E., II, 2003. "Reforming The Cap: A Partial Equilibrium Analysis Of The Mtr Proposals," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25856, International Association of Agricultural Economists.
    6. Jeroen Buysse & Bruno Fernagut & Olivier Harmignie & Bruno Henry de Frahan & Ludwig Lauwers & Philippe Polomé & Guido Van Huylenbroeck & Jef Van Meensel, 2007. "Farm-based modelling of the EU sugar reform: impact on Belgian sugar beet suppliers," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(1), pages 21-52, March.
    7. Huettel, Silke & Kleinhanss, Werner & Offermann, Frank, 2005. "Impacts of Decoupling and Milk Quota Trade on the French and German Dairy Sectors," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24731, European Association of Agricultural Economists.
    8. Alexandre Gohin, 2006. "Assessing CAP Reform: Sensitivity of Modelling Decoupled Policies," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(3), pages 415-440.
    9. Breen, James P. & Hennessy, Thia C. & Thorne, Fiona S., 2005. "The effect of decoupling on the decision to produce: An Irish case study," Food Policy, Elsevier, vol. 30(2), pages 129-144, April.
    10. Joe Dewbre & Jesús Antón & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
    11. Gelan, Ayele & Schwarz, Gerald, 2006. "A Policy Impact Evaluation Model For Scotland: Decoupling Single Farm Payments," MPRA Paper 1491, University Library of Munich, Germany.
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    More about this item

    Keywords

    European Union; Common Agricultural Policy; Single Farm Payment; modelling; area payments; lump-sum transfers;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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