@article{Jacobsen:331256,
      recid = {331256},
      author = {Jacobsen, Lars-Bo},
      title = {Organic Production in a Dynamic CGE Model – Effects of the  2003 Reform of the CAP},
      address = {2004},
      pages = {27},
      year = {2004},
      note = {Presented at the 7th Annual Conference on Global Economic  Analysis, Washington DC, USA},
      abstract = {Concerns about the impact of modern agriculture on the  environment have in recent years led to an interest in  supporting the development of organic farming. Besides  environmental benefits, the aim is to encourage the  provision of “multifunctional” properties of organic  farming such as rural amenities and rural development that  are spill-over benefits additional to the supply of food.  In this paper we modify an existing dynamic general  equilibrium model of the Danish economy to specifically  incorporate organic farming. In the model and input-output  data each primary agricultural sector and each secondary  food industry has been split into two separate industries:  one producing organic products, the other producing  conventional products. The substitution nests in private  consumption have also been altered to enable pair wise  substitution between organic and conventional products. To  receive specific subsidies for organic production the  current regulation requires organic farmers to produce  using organic methods for a period of five years. Failing  to do so will mean that received subsidies during the  period must be paid back thus practically forcing farmers  to retain the organic authorization even though it might be  economically optimal to withdrawn from organic farming in  the current year. This means that the return to land can  vary substantially between conventional and organic farming  in the short run. To introduce this concept into the model  we develop a theory that describes the dynamic time path of  land allocation between organic and conventional farming.  Agricultural land is treated explicitly as a stock and  there is a stock accumulation relationship for land and an  explicit modelling of the rate of stock accumulation (i.e.  land investment based on expected returns). While returns  can differ between conventional and organic farming in the  short run we assume the land allocation adjust within  organic farming to equalize return for all usage of organic  land in each year. The same apply for conventional land. We  use the empirical model to illustrate the land allocation  theory by constructing a long term forecast for the  development of the Danish economy. Moreover we simulate the  effect of the recently agreed 2003 reform of the Common  Agricultural Policy (CAP).},
      url = {http://ageconsearch.umn.edu/record/331256},
}