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Effects of policy instruments on farm investments and production decisions in the Spanish COP sector

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Our article assesses the impacts regarding on-farm investment and production decisions resulting from the Partially Decoupled (PD) payment scheme implemented during the 1990s and first half of the 2000s within the framework of the Common Agricultural Policy (CAP). The Spanish Cereal, Oilseed and Protein (COP) sector is taken as a case study regarding this effect due to its economic and political relevance in Spain. The empirical analysis is applied to farm-level data from 2000 to 2004 using the Farm Accountancy Data Network (FADN). We use a reduced-form application of the dual model of investment under uncertainty and estimate a system of censored and uncensored equations. PD payments are found to increase short-run production and generate a statically significant increase in the investment in farm assets. Results also show the importance of assessing the effects of PD payments in a dynamic framework as applied in this article.

Keywords: Q12; Q18; D80; common agricultural policy; decoupling; farm investments; production

Document Type: Research Article


Affiliations: Centre de Recerca en Economia i Desenvolupament Agroalimentaris, (CREDA)-UPC-IRTA, Parc Mediterrani de la Tecnologia, Edifici ESAB, Avinguda del Canal Olímpic s/n08860 Castelldefels (Barcelona), Spain

Publication date: 2012-10-01

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