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Common Agricultural Policy (CAP) reforms over the last two decades have increased the sensitivity of EU farm incomes to market fluctuations. Following legal proposals from the European Commission, an income stabilisation tool may be introduced during the 2014-2020 period. From a theoretical perspective, it is not possible to evaluate a priori how farmers will actually respond in terms of input and output allocation to such measures and therefore what the impacts on farm income will be. This paper assesses the potential implementation of these payments using a farm household model calibrated to French cereal farms.


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