Multifunctional Agriculture - What does the Economic Literature Tell Us?

Multifunctionality is a multifaceted concept and the economic literature that treats the concept has mushroomed over the last couple of years. This paper surveys that literature. With respect to quantification of multifunctional production, it is concluded that jointness in production is at the core of the multifunctionality problem and that scale issues may be highly important. A large share of the paper considers the policy design literature. It is shown i.a. that the level of transaction costs has to be considered when developing policies, that even optimal policies may be controversial from a trade perspective and that the spatial variation both in production and values should be accounted for. One of the main problems from a policy perspective is the identification and valuation of the objects that are to be paid for.