[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fsc/fspubl/46.html
   My bibliography  Save this paper

Assessing the Market Impacts of the Common Agricultural Policy: Does Farmers' Risk Attitude Matter?

Author

Listed:
  • Alexandre Gohin
  • Yu Zheng
Abstract
Recent models assessing the market impacts of Common Agricultural Policy (CAP) reforms are mostly static, non-stochastic and do not account for the risk attitude of farmers. This paper is a first attempt to fill this gap. We develop a stochastic version of GTAP-AGR model in which we introduce exogenous productivity shocks and farmers' attitude towards risks. In addition to the expectation on mean price, the expectation on price volatility also becomes one of the key factors for the farmers' decisions through its influence on risk premium. We show that under the endogenous modeling of the CAP instruments, risk aversion leads to larger production and price effects. The impacts are even larger if wealth effect is taken into consideration.

Suggested Citation

  • Alexandre Gohin & Yu Zheng, 2016. "Assessing the Market Impacts of the Common Agricultural Policy: Does Farmers' Risk Attitude Matter?," FOODSECURE Working papers 46, LEI Wageningen UR.
    • Handle: RePEc:fsc:fspubl:46
    as

    Download full text from publisher

    File URL: http://www3.lei.wur.nl/FoodSecurePublications/46_Gohin_Zheng_capsimulation_complete.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ole Boysen & Hans Grinsted Jensen & Alan Matthews, 2016. "Impact of EU agricultural policy on developing countries: A Uganda case study," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(3), pages 377-402, June.
    2. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2000. "North American Farm Programs and the WTO," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 768-774.
    3. Roman Keeney & Thomas W. Hertel, 2009. "The Indirect Land Use Impacts of United States Biofuel Policies: The Importance of Acreage, Yield, and Bilateral Trade Responses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 895-909.
    4. Keeny, Roman & Hertel, Thomas, 2005. "GTAP-AGR: A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," Technical Papers 283422, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Fabienne Femenia & Alexandre Gohin & Alain Carpentier, 2010. "The Decoupling of Farm Programs: Revisiting the Wealth Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 836-848.
    6. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, September.
    7. Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
    8. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.
    9. Renwick, Alan W. & Jansson, Torbjorn & Verburg, Peter H. & Revoredo-Giha, Cesar & Britz, Wolfgang & Gocht, Alexander & McCracken, Davy, 2011. "Policy Reform and Agricultural Land Abandonment," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108772, Agricultural Economics Society.
    10. Heckelei, Thomas, 2014. "Volatility and Dynamics in Agricultural and Trade Policy Impact Assessment – Modelling Advances Needed," 2014: Food, Resources and Conflict, December 7-9, 2014. San Diego, California 197177, International Agricultural Trade Research Consortium.
    11. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    12. Mittenzwei, Klaus & Britz, Wolfgang & Wieck, Christine, 2014. "Does the “green box” of the European Union distort global markets?," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(1), pages 1-20, April.
    13. Boussard, Jean-Marc & Gerard, Francoise & Piketty, Marie Gabrielle & Ayouz, Mourad & Voituriez, Tancrede, 2006. "Endogenous risk and long run effects of liberalization in a global analysis framework," Economic Modelling, Elsevier, vol. 23(3), pages 457-475, May.
    14. Brian E. Roe, 2015. "The Risk Attitudes of U.S. Farmers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 37(4), pages 553-574.
    15. Janine Pelikan & Wolfgang Britz & Thomas W. Hertel, 2015. "Green Light for Green Agricultural Policies? An Analysis at Regional and Global Scales," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(1), pages 1-19, February.
    16. Lilli Aline Schroeder & Alexander Gocht & Wolfgang Britz, 2015. "The Impact of Pillar II Funding: Validation from a Modelling and Evaluation Perspective," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(2), pages 415-441, June.
    17. Boulanger, Pierre & Philippidis, George, 2015. "The EU budget battle: Assessing the trade and welfare impacts of CAP budgetary reform," Food Policy, Elsevier, vol. 51(C), pages 119-130.
    18. Frank Ackerman & Elizabeth Stanton & Ramón Bueno, 2013. "Epstein–Zin Utility in DICE: Is Risk Aversion Irrelevant to Climate Policy?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 73-84, September.
    19. Stephan Nolte & Jeroen Buysse & Guido Van Huylenbroeck, 2012. "Modelling the effects of an abolition of the EU sugar quota on internal prices, production and imports," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 39(1), pages 75-94, February.
    20. Urban, Kirsten & Hans Grinsted Jensen & Martina Brockmeier, 2014. "Extending the GTAP Data Base and Model to Cover Domestic Support Issues using the EU as Example," GTAP Technical Papers 4569, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    21. Hans van Meijl & Frank van Tongeren, 2002. "The Agenda 2000 CAP reform, world prices and GATT--WTO export constraints," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 29(4), pages 445-470, December.
    22. Maria Espinosa & Demetrios Psaltopoulos & Fabien Santini & Euan Phimister & Deborah Roberts & Sebastien Mary & Tomas Ratinger & Dimitris Skuras & Eudokia Balamou & Manuel A. Cardenete & Sergio Gomez y, 2014. "Ex-Ante Analysis of the Regional Impacts of the Common Agricultural Policy: A Rural-Urban Recursive Dynamic CGE Model Approach," European Planning Studies, Taylor & Francis Journals, vol. 22(7), pages 1342-1367, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gohin, Alexandre & Zheng, Yu, 2015. "Assessing the Market Impacts of the Common Agricultural Policy: Does Farmers’ Risk Attitude Matter?," 2015: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229235, International Agricultural Trade Research Consortium.
    2. Gohin, Alexandre & Zheng, Yu, 2020. "Reforming the European Common Agricultural Policy: From price & income support to risk management," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 712-727.
    3. Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    4. Urban, Kirsten & Jensen, Hans G. & Brockmeier, Martina, 2016. "How decoupled is the Single Farm Payment and does it matter for international trade?," Food Policy, Elsevier, vol. 59(C), pages 126-138.
    5. Pierre Boulanger & Kirsten Boysen-Urban & George Philippidis, 2021. "European Union Agricultural Support ‘Coupling’ in Simulation Modelling: Measuring the Sustainability Impacts," Sustainability, MDPI, vol. 13(6), pages 1-17, March.
    6. Matthews, Alan & Salvatici, Luca & Scoppola, Margherita, 2017. "Trade Impacts of Agricultural Support in the EU," Commissioned Papers 252767, International Agricultural Trade Research Consortium.
    7. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets after price support schemes are removed?:," IFPRI discussion papers 1205, International Food Policy Research Institute (IFPRI).
    8. Zheng, Yu & Gohin, Alexandre, 2017. "Assessing The Market Impacts Of The Common Agricultural Policy: Does Farmers' Risk Attitude Matter?," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260903, European Association of Agricultural Economists.
    9. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets once price support schemes are removed? A General Equilibrium analysis applied to European reforms," Conference papers 330253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    11. Femenia, Fabienne, 2010. "Impacts of Stockholding Behaviour on Agricultural Market Volatility: A Dynamic Computable General Equilibrium Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
    12. Huber, Robert & Bakker, Martha & Balmann, Alfons & Berger, Thomas & Bithell, Mike & Brown, Calum & Grêt-Regamey, Adrienne & Xiong, Hang & Le, Quang Bao & Mack, Gabriele & Meyfroidt, Patrick & Millingt, 2018. "Representation of decision-making in European agricultural agent-based models," Agricultural Systems, Elsevier, vol. 167(C), pages 143-160.
    13. Ole Boysen & Kirsten Boysen‐Urban & Alan Matthews, 2023. "Stabilizing European Union farm incomes in the era of climate change," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1634-1658, September.
    14. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    15. O’Toole, Conor & Hennessy, Thia, 2015. "Do decoupled payments affect investment financing constraints? Evidence from Irish agriculture," Food Policy, Elsevier, vol. 56(C), pages 67-75.
    16. Mittenzwei, Klaus & Britz, Wolfgang & Wieck, Christine, 2014. "Does the “green box” of the European Union distort global markets?," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(1), pages 1-20, April.
    17. Luca Di Corato & Dimitrios Zormpas, 2022. "Investment in farming under uncertainty and decoupled support: a real options approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(4), pages 876-909.
    18. Kehinde Oluseyi Olagunju & Myles Patton & Siyi Feng, 2020. "Estimating the Impact of Decoupled Payments on Farm Production in Northern Ireland: An Instrumental Variable Fixed Effect Approach," Sustainability, MDPI, vol. 12(8), pages 1-17, April.
    19. Maietta, Ornella Wanda & De Devitiis, Biagia & Destefanis, Sergio & Suppa, Domenico, 2019. "Human capital and rural development policy: evidence from European FADN regions," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 8(3), December.
    20. Ole Boysen & Kirsten Boysen-Urban & Alan Matthews, 2021. "Alternative EU CAP Tools for Stabilising Farm Incomes in the Era of Climate Change," Working Papers 202103, Geary Institute, University College Dublin.

    More about this item

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fsc:fspubl:46. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Barbara van der Hout (email available below). General contact details of provider: https://edirc.repec.org/data/ledlonl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.