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Modelling the Impact of Decoupling on Structural Change in Farming: Integrating Econometric Estimation and Optimisation

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  • Hennessy, Thia C.
  • Rehman, Tahir

Abstract

Implementation of the Mid Term Review of the Common Agricultural Policy on farming in Europe is expected, and intended, to initiate structural changes in European agriculture. This impact of the agricultural policy reform will be triggered at the farm level with both up- and down-stream effects for agriculture in Europe. Modelling such a phenomenon is challenging. An integrated modelling approach, involving farm level optimisation models and exogenously estimated econometric models of farmer behaviour, is developed for Ireland; this framework is a general one and is applicable elsewhere. Entry and exit from farming, postulated as the main consequences of the policy reform, are estimated exogenously to determine their role in the allocation of farm labour. The results for Ireland show that farm numbers will decline more rapidly under decoupling relative to a baseline situation. Further, decoupling is likely to favour beef farming but, an increasing number of beef farmers will have to rely on outside income to sustain that system of farming. Dairy farmers will face a price cost squeeze and structural change in this sector will be accelerated.

Suggested Citation

  • Hennessy, Thia C. & Rehman, Tahir, 2006. "Modelling the Impact of Decoupling on Structural Change in Farming: Integrating Econometric Estimation and Optimisation," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25271, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25271
    DOI: 10.22004/ag.econ.25271
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    References listed on IDEAS

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    1. Schmidt, Peter & Strauss, Robert P, 1975. "The Prediction of Occupation Using Multiple Logit Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 471-486, June.
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    Cited by:

    1. Sahrbacher, Christoph, 2011. "Regional structural change in European agriculture: Effects of decoupling and EU accession," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 60, number 60.
    2. Darragh Clancy & A. Kazukauskas & C. Newman & Fiona Thorne, 2009. "An investigation of the level of structural change in the agrifood sector of Ireland, Denmark and the Netherlands," Working Papers 0915, Rural Economy and Development Programme,Teagasc.

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    Keywords

    Agricultural and Food Policy;

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