Unintended Consequences of Environmental Policies: the Case of Set-aside and Agricultural Intensification[Conséquences involontaires des politiques environnementales : le cas du gel des terres et de l'intensification de l'agriculture]

The objective of this paper is to evaluate the indirect impacts of a set-aside policy on the environment through crop intensification. We estimate a structural, multi-output model on a panel of French farmers from 2006 to 2010, accounting for multivariate selection (corner solutions) on crops and land use. We use a parametric and a semi-nonparametric (based on sieve estimation) version of a quasi-maximum likelihood (QML) estimator, compare their goodness of fit and parameter efficiency and check for closeness with a test for non-nested models. We then perform a simulation experiment based on elasticity estimates for set-aside area and input demand, to evaluate intensive margin effects of the set-aside policy. Results show that a set-aside subsidy can provide farmers with incentives to intensify their production, leading to potential adverse environmental effects.