Different CAP support systems - evaluation of the impact on supply of agricultural products
2007
Salputra, G. | Miglavs, A.
A unified methodological approach is required in order to perform within the policy harmonization process the quantitative evaluation of the impact of various elements of the CAP direct support systems upon the supply of agricultural products and its structural changes. Possibilities of formalization have been assessed on the basis of the econometric model of agricultural and food products AGMEMOD, which is used and developed for all Member Countries incl. Latvia within the Framework 6 Programme Project AGMEMOD 2020. The AGMEMOD models mainly focus on the effect of direct payments and responds on changes in key European market prices as a factors incentive for production development. For taking into account the impact of a new support unrelated to volume of production, presumptions are made for the present regarding it's formalization via supply inducing coefficients - multipliers, or incentive price. It is assumed that the support related to a product or to the resource for its production has direct impact upon the volume of supply. The support granted for the land irrespective of the type of obtained product can act as an additionally stimulating factor; however, it should be evaluated as negative if the payment rate constitutes the economic bases for alternative business activity. Results of the research show that in order to improve policy analysis in the AGMEMOD model, it should be taken into account that both the policy systems and the fiscal envelopes are variable by 2013. To make the models capable to incorporate the switches in agricultural policy regimes implementation of the envelopes for all types of direct support and direct support measures currently not included should be similarly applied for all countries. The multipliers measuring the weight of impact of the direct support on production are crucially important for the calculations. Consequently, for future evaluation of compliance of the values of these multipliers, the analysis of econometric coherences is required.
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