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Abstract
Our paper asses the impacts of the partially decoupled (PD) scheme, implemented during the 1990s and
first half of the 2000s in the framework of the Common Agricultural Policy (CAP), on on-farm investment as well as
on other production decisions. The Spanish COP sector was taken as a case study due to its economic and political
relevance. The empirical analysis is applied on farm-level data from the Farm Accountancy Data Network (FADN),
observed from 2000 to 2004, based on. We use a reduced-form application of the dual model of investment under
uncertainty and a system of censored and non censored equations is estimated. PD payments are found to increase
short-run production and to generate a statically significant increase in the investment in farm assets. Results also
show the importance of assessing the effects of PD payments in a dynamic framework as the one applied in this
paper.