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GTAP Resource #3623

"EU Single Farm Payment in the GTAP Data Base: Coupled, Decoupled or only Somewhat Decoupled and How to Get the Decoupling Right?"
by Boysen-Urban, Kirsten, Hans Grinsted Jensen and Martina Brockmeier

Since 1992 the Common Agricultural Policy (CAP) of the European Union has been subjected to diverse reforms. The implementation of the single farm payment (SFP) and its corresponding concept of decoupling support from production in 2003 was clearly one of the most important ones. However, a strong debate about the degree of decoupling of those single farm payments is still going on today. Our literature review reveals diverse studies discussing how decoupled direct payments in general were before the decoupling from production has taken place. Besides there are papers that are concerned with specific payments and some studies which already consider the single farm payment itself. GOHIN (2006) analyzed the results of impact studies focusing on decoupling issues, tested their sensitivity using a CGE model with regard to the assumptions made and pointed out that further research is required.
In version 8 of the GTAP data base the EU single farm payment is currently distributed according to production values. Does this way of modeling the EU single farm payment indeed mirror the level of real world decoupled payments? To answer these questions we first employ OECD and GTAP data as well as the GTAP model to create four deviating versions of the GTAP data base. In so doing, we use different underlying assumptions about the allocation of the SFP, i.e., distributing SFP according to (1) factor usage, (2) a prefix share of 50% on land, and 25% on labor and capital, respectively, (3) a 100% subsidy on land and (4) the initial approach. These four deviating GTAP data bases are subsequently used to run an exemplary policy simulation which we chose to be a 100% removal of the SFP. This sensitivity analysis reveals strong differences in results, but particularly in the production responses of food and agricultural sector. Accordingly, it is obvious that the allocation of the SFP in the GTAP database is a decisive factor for models results and needs further consideration.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Boysen-Urban, K. (4/15/2011)
Updated: Boysen-Urban, K. (4/27/2011)
Visits: 1,862
- Domestic policy analysis
- Agricultural policies
- The GTAP Data Base and extensions
- European Union

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