Loosening Your Collar - Alternative Implementations of QQQ Collars
Impact of alternative implementations of the Agenda 2000 Mid Term Review
description
Transcript of Impact of alternative implementations of the Agenda 2000 Mid Term Review
![Page 1: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/1.jpg)
Bio-Science EngineeringBio-Science EngineeringDepartment of Agricultural EconomicsDepartment of Agricultural Economics
Impact of alternative implementations
of the Agenda 2000 Mid Term Review
An application of SEPALE
![Page 2: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/2.jpg)
Department of Agricultural Economics
Structure of the presentation
■ PMP
■ Basic model description: SEPALE
■ MTR
■ MTR implementation in SEPALE
■ Results
■ Problems: optimisation
■ Discussion
![Page 3: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/3.jpg)
Department of Agricultural Economics
PMP
![Page 4: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/4.jpg)
Department of Agricultural Economics
SEPALE: main characteristics
■ Belgian FADN data■ Simultaneous optimisation of farm level profit
functions■ Simulation results can be aggregated according to the
farm's localisation, type and size ■ Exchange between farms of land and quota■ Constraints:
● Land at regional level● Quota at farm and regional level● Animal feed through CES function
■ Solved with GAMS
![Page 5: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/5.jpg)
Department of Agricultural Economics
SEPALE: calibration of profit functionP X + subsidies – Q/2 X² - H X
Q and H are cost function parametersP: priceX: production
■ 1st derivative to X is zero: MC = MR P = Q X + H
■ Total costs observed including seeds, fertilizers, pesticides, contract work and land = Q/2 X² - H X
■ Two equations and two unknown parameters parameters can be directly calculated
■ Constraint to prevent that total land use of the sample does not change
![Page 6: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/6.jpg)
Department of Agricultural Economics
MTR
■ single farm payment replaces the direct payments to activities
■ direct aid is linked to compliance with rules, called cross-compliance
■ Modulation: system of progressive reduction of direct payments: 5% in 2007 beyond 5000 euro per farm
![Page 7: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/7.jpg)
Department of Agricultural Economics
MTR in SEPALE: decoupling
■ The reference amount is divided over the reference area to assign the payment entitlement per ha for each farm
■ Area with eligible crops, all crops except potatoes and vegetables in open air, can activate the subsidy entitlements
![Page 8: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/8.jpg)
Department of Agricultural Economics
MTR in SEPALE: decoupling
■ Three situations could occur:1. The same area of eligible crops as during the
reference period: same direct payments
2. Increasing eligible area does not increase the amount of direct payments.
3. The amount of direct payments decline by a reduction of the eligible land
![Page 9: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/9.jpg)
Department of Agricultural Economics
MTR in SEPALE: decoupling
■ two farm level constraints should be added: Activated area ≤ Reference area
Activated area ≤ Eligible area
■ The direct payments extend the profit function, as follows:
Profit + activated area * reference amount
![Page 10: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/10.jpg)
Department of Agricultural Economics
MTR in SEPALE: modulation
■ Should be added during optimisation because farms can avoid reductions by transfers of direct payment entitlements
■ Two parameters controlled by policy:● Modulation threshold: amount free from
reductions
● Modulation percentage: percentage reduction
![Page 11: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/11.jpg)
Department of Agricultural Economics
MTR in SEPALE: transfers of entitlements
■ Can occur both with as without transfer of land.
■ Each member state can confiscate a certain percentage of the transferred entitlements.
■ Transfers with land: 10% of the entitlement can revert to the national reserve
■ Transfers without land: up to 30% can revert to the national reserve.
![Page 12: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/12.jpg)
Department of Agricultural Economics
MTR in SEPALE: transfers of entitlements■ 7 constraints and 7 extra variables
● Calculation of the amount of not activated entitlements ● Calculation of the average value of not activated
entitlements ● Calculation of free eligible land per farm● Calculation of acquired land ● Constraint to prevent transfers beyond the free eligible land● There should be more not activated entitlements than
transferred entitlements● Complementary slackness constraint to prevent farms from
being buyer and seller at the same time
![Page 13: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/13.jpg)
Department of Agricultural Economics
Impact analysis
■ 159 arable and cattle farms for which data were available for the year 2002
■ Impact on supply and gross margin of:● Decoupling ratio
● Modulation percentage
● Modulation threshold
● Transfers of direct payments?
![Page 14: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/14.jpg)
Department of Agricultural Economics
Decoupling – land use
-8
-6
-4
-2
0
2
4
6
8
10
0 50 100 decoupling ratio
change in land use (%)
nonsubsidizedcrops
nonsubsidizedfodder crops
non eligiblecrops
subsidizedfodder crops
subsidizedcrops
![Page 15: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/15.jpg)
Department of Agricultural Economics
Decoupling – gross margin
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
0 50 100 decoupling ratio
change in gross margin (%)
small
medium
large
extra large
![Page 16: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/16.jpg)
Department of Agricultural Economics
Modulation percentage – gross margin
-1
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
10 15 20 25 30 modulation percent
change in gross margin (%)
Small
Medium
Large
Extra Large
![Page 17: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/17.jpg)
Department of Agricultural Economics
Modulation threshold – gross margin
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
5000 4000 3000 2000 modulation threshold
change in gross margin (%)
Small
Medium
Large
ExtraLarge
![Page 18: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/18.jpg)
Department of Agricultural Economics
Problem: numerical optimisation
■ no progress at all in the solution process. the optimality criteria have not been satisfied ● ABS function
● Discontinuities
● Complementary slackness constraint
■ multi-extremal decision models can be very difficult to solve, standard optimization strategies are not always sufficient
![Page 19: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/19.jpg)
Department of Agricultural Economics
Conclusion + discussion
SEPALE: individual farm-based sector model■ Advantages:
● to account for the individual farm structure ● to simulate impact according to farm
characteristics● to simulate transfers between farms
■ Disadvantages:● Limited data for calibration at farm level● More complex model structure
![Page 20: Impact of alternative implementations of the Agenda 2000 Mid Term Review](https://reader036.fdocuments.net/reader036/viewer/2022083006/56813ae5550346895da3415d/html5/thumbnails/20.jpg)
Department of Agricultural Economics
Further research
■ Functional form
■ Environmental indicators
■ Demand side – link with other EU member states
■ Transaction costs
■ Risk