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Abstract

This paper deals with the ex-ante analysis of the effects of farm subsidies on farm behaviour. Beside that the risk factor is implemented in the farm model to reflect and quantify potential (negative) impact on farm results. A farm-level optimization model is used to assess the effects of different kind of policies and risk on production structure, income indicators and land use management. It appeared that a reasonable level of risk (via income variation) have impact, but not significant. If liberalisation would have happened (zero direct and disadvantageous payments) production would homogenised, 30% of land would remained abandoned, production and income would clearly decline. Other scenario points out that environmental objectives (here through more extensively managed land) could not be necessarily more costly, but in such a case without accompanying livestock. To increase profitable livestock production requires to provide grassland and animal payments above the current level (obviously in addition to stimulating production economizing) whereas both payments should be conditional to each other.

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