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Abstract

An agricultural sector model for ex ante policy analysis is developed and applied for the simulation of alternative implementations of the Agenda 2000 Mid Term Review (MTR). The model uses an adapted version of Positive Mathematical Programming allowing simultaneous modelling of individual farms. It applies farm level calibrated quadratic cost functions to a sample of the Farm Accountancy Data Network to account for the large variability among farms. The farm level approach is important for the evaluation of the MTR, because MTR policy instruments rely on differences between farms. Extending the model for coping with the MTR implies three important elements: i) modelling the activation of decoupled direct payment entitlements, ii) simulating the modulation and iii) the transfers of direct payment entitlements. While most MTR analysis's focus on the first element, the current paper also tries to deal with the two last elements of the MTR.

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