Incorporating farm structural change in models assessing the Common Agricultural Policy: An application in the CAPRI farm type model

This paper analyses the impact of incorporating farm structural change in the baseline of the partial equilibrium model CAPRI-FT (Common Agricultural Policy Regionalised Impact System-Farm Type). Structural change is defined as the change in the number of farms in a specific farm typology (defined by farm specialisation, region and economic size). In this study it has been assessed the changes derived from incorporating the exogenous estimated structural change in the CAPRI-FT baseline. In particular three different approaches have been compared with the naïve approach in which no structural change is considered. We apply a Bayesian motivated estimation framework, which treats the available information for each farm type as a random variable in the mathematical programming model. The comparison of the three approaches with the naïve baseline demonstrates that the incorporation of farm structural change has an effect in the area, herd size and economic size unit distribution in the farms types. These results highlight the need of incorporating farm structural adjustments in the ex-ante policy modelling exercises assessing the Common Agricultural Policy.