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Agriculture in dry land Mediterranean areas faces considerable level of production risk as result of the unpredictable weather. Governmental income stabilisation instruments have had a major impact on Mediterranean farms in changing land allocation, and changing income levels and variability. Using a mathematical programming model, the impact of the 2003 CAP reform on land allocation and on income variability is evaluated for a Portuguese Mediterranean farm. The results show an increase of extensification of production activities. They also show an increase in total farm income, a reduction in relative total income variability and an increase in relative production income variability.


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