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How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?

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  • Courleux, Frédéric
  • Guyomard, Hervé
  • Levert, Fabrice
  • Piet, Laurent

Abstract

The 2003 Common Agricultural Policy (CAP) reform radically changes the way the European Union (EU) supports its agricultural sector by decoupling direct payments. Production is no longer required to get the payment attached to Single Farm Payment (SFP) entitlements. However, the new scheme maintains a specific link between payments and hectares; in addition, SFP entitlements can be exchanged among farmers. These features question the way SFP entitlements should be regarded, hence modelled, i.e., as lump-sum transfers, area payments or… something else. We develop a microeconomic analytical framework which shows that the answer crucially depends on the total number of entitlements which are initially made available relative to the number of hectares, more specifically the number of cultivated hectares in a zero support regime, the number of cultivated hectares in a policy support regime trough per-hectare direct aids, and the number of cultivated or idled hectares in a policy regime where support is granted through direct aids per hectare and production is not required.

Suggested Citation

  • Courleux, Frédéric & Guyomard, Hervé & Levert, Fabrice & Piet, Laurent, 2008. "How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?," Working Papers 211014, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    • Handle: RePEc:ags:inrasl:211014
    DOI: 10.22004/ag.econ.211014
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    More about this item

    Keywords

    Agricultural Finance;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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