Expected Utility or Prospect Theory Maximizers? Results from a Structural Model based on Field-experiment Data

We elicit risk preferences of French farmers in a field experimental setting under expected utility theory and cumulative prospect theory. We use two different estimation methods, namely the interval approach and the estimation of a random preference model. On average, farmers are risk averse and loss averse. They also exhibit an inverse S-shaped probability weighting function, meaning that they tend to overweight small probabilities and underweight high probabilities. We infer from our results that CPT explains farmers’ behaviour better than EUT in the context of our experiment. We also investigate how preferences correlate with individual socio-demographic characteristics. We find that education and agricultural innovation are negatively linked with risk aversion. Our results also show that age, education, household size and the level of secured income tend to lower farmers’ loss aversion. Finally, older farmers and farmers with large farms distort probabilities less than the others. These findings contribute to the literature which compares expected utility with competing decision theories. They also give important insights into farmers’ behaviour towards risk, which is critical for relevant public policy design.risk preferences, field experiment, experimental economics, prospect theory, Risk and Uncertainty, C91, D81, J16, Q12,

Impacts of the French bio-fuel policy on the French arable crop sub-sector

The paper provides an analysis of the impacts of the biofuel policy on the French arable crop sub-sector. The model used is a biofuel supply model composed of an agricultural module and an industrial biofuel processing module. The agricultural supply model is an aggregation of 1094 farm models, based on data from the French Farm Accountancy Data Network (FADN). Different biofuel chains are included in the model: ethanol from wheat and sugar beet, biodiesel (Vegetable Oil Methyl Ester) from rapeseed and sunflower. Scenarios are built upon the recent policy of an increased demand of biofuels for the next years, under the assumption of fulfilling the targets with domestic production only. Results show that the incorporation target of 7% of biofuels in transport fuels would have small impacts on the wheat and sugar beet cultivated areas but would lead to a considerable increase in the rapeseed area. In the main producing regions, the rapeseed area would reach approximatively a third of the total farmed area. This would not be without consequences on the environment, due to the increase in pesticide use that this change in cropping patterns would most certainly induce. It would not be possible to reach a 10% incorporation target without imports. Furthermore, we analyse the impacts of reaching these production levels on the rapeseed opportunity costs, and show that reaching high level of incorporation (above 7%) will need a very high increase in rapeseed prices paid to farmers. We calculate the impacts of this opportunity cost increase on the competitiveness of biofuels with respect to fossil oil, for different levels of oil prices. We test the sensitivity of the results against the wheat price, and show that this latter will have a significant impact on the biodiesel competitiveness.biofuel, agriculture, France, Agricultural and Food Policy, Crop Production/Industries,

Euromediterranean agreements: which advantages for Mediterranean countries in fruit and vegetables sector?

This article measures the advantage granted by the European Union to different Mediterranean countries in the fruit and vegetables sector in the framework of the Euro-Mediterranean Association Agreements. The advantage of each country are evaluated by calculating the value of the preferential margins, which compares the amount of the customs duties paid by an exporting country with the amount of the duties this country would have paid if it had not enjoyed tariff preferences. The situation of the Mediterranean countries appears to be highly unequal in terms of the advantages granted by the EU in the fruit and vegetables sector. The progress of bilateral negotiations and the export structure in each country explain the significant variations in preferential margins from one Mediterranean country to the next. These results allow us to discuss the potential impacts of a liberalisation of fruit and vegetable trade within the Euro-Mediterranean zone.Euromediterranean agreements, preferential margin, fruit and vegetables, Agricultural and Food Policy, International Relations/Trade,

EU market access for Mediterranean fruit and vegetables: A gravity model assessment

Since 1995, a liberalization process - the so- called Barcelona Process - has begun in the Mediterranean area. It aims at establishing a free trade area for 2010 in the Mediterranean Basin. For the moment the full liberalization concerns industrial product s trade whereas agriculture remains sensitive. Among agricultural product s, the fruit and vegetables (F&V) sector is essential for Mediterranean countries and the EU is their first trading partner. In this context, two questions arise: Firstly, to what extent protection influence trade for the med countries, compared to the other countries? Secondly, what would be the impacts of a greater liberalization on F&V trade between the EU and Mediterranean Countries? Our model, based on the new development s of gravity equation focuses on the difficulties faced by the Mediterranean countries to enter on the EU market, compared to the other EU partners, considering the relative impact of the different trade costs. It is estimated at the product level, in a sector with a huge specificity: some product s may be very perishable and thus particularly time sensitive. The Mediterranean basin appears as a highly heterogeneous country bloc. Beside the actual level of preferences allowed by the EU, two main elements vary according to the exporting country: its tariff sensitivity and its "non- tariff" trade resistance. Thus, with respect to the Euromed liberalization, the higher the tariff sensitivity the higher the impact of liberalization on trade and this impact can be limited by a high trade resistance (NTB, logistic constraints...).Fruit and Vegetables, EU-Med agreement, gravity models, transport cost, tariffs, International Relations/Trade, Marketing,

Quatre voies pour aller plus loin.

National audienceIl s'agit ici de tirer parti des réflexions dont ce numéro est riche pour tracer quelques pistes, non exhaustives, permettant d'améliorer les synergies entre agronomes et économistes pour aller vers des agricultures plus conformes aux attentes de la société. Nous proposons que les échanges ouverts lors des Entretiens du Pradel et dans ce numéro de la revue AE&S se poursuivent selon quatre voies. La première voie est celle de l'approfondissement théorique et méthodologique. Les agronomes n'ont pas tous le même point de vue sur l'exploitation agricole, et les économistes non plus. Il existe cependant des ancrages à des hypothèses disciplinaires, qui probablement distinguent les deux communautés au-delà des nuances que chacune reconnaît en son sein. La seconde voie est celle de l'extension du domaine de la collaboration. Le couple exploitation agricole/politiques publiques a délibérément été positionné au centre de ce numéro. C'est à partir de l'analyse concrète d'exploitationsagricoles et de leurs trajectoires que le dialogue était le plus facile à mener. On s’est accordé à souligner l’importance d’approfondir cette analyse commune du fonctionnement de l’exploitation trop délaissée aujourd’hui. Certains points paraissent mériter une attention particulière : le lien entrel’évolution des structures d’exploitation et l’évolution des techniques culturales, le travail et ses différentes dimensions : technicité, compétence, apprentissage, etc. En surplomb de ces deux premières voies en existe une troisième, qui est celle des données sur lesquelles agronomes et économistes pourraient collaborer. Dépasser l'analyse de monographies d'exploitations, si fructueuse soit-elle, semble une nécessité pour parvenir à des résultats porteurs d'une représentativité, nécessaires pour l'action. Cela passe par l'élaboration d'un appareil de données organisées, au minimum à l'échelle nationale. Enfin la dernière perspective que nous souhaitons évoquer est celle du travail en commun sur des scénarios d'évolution des agricultures

Spatially explicit farming system modelling for an efficient agri-environmental policy design

A mathematical programming model is developed and associated to a spatial pattern index (Ripley L-function) to analyse the optimal reserve design and implementation for the Little Bustard conservation in Plaine de Niort. The model structure corresponds to three spatial levels, fields, farm and landscape. Simple in terms of area representation it is detailed in term of farm behaviour and spatially explicit. The model is applied in a normative and in a positive way. The major findings of the normative approach relate to the trade-offs between the reserve pattern and its cost. It was found that the environmentally optimal reserve, which is randomly dispersed across the zone, is the most costly one. Within the positive approach, it is illustrated that the various reserve patterns generated within the normative approach can be obtained through relatively simple uniform contract structures. The most effective contract structure is a degressive set of two payments enabling all the farms to enrol at least a small share of their land.Biodiversity, spatial optimization, mathematical programming, agri-environmental policies, Tetrax tetrax, Agricultural and Food Policy, Environmental Economics and Policy, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,

Farm Income Stabilization: A Central Goal for American and European Policies

The central thesis developed in this paper is that snapshot views of the global measures of agricultural support mask what is really happening in U.S. and E.U. agricultural policies. We demonstrate that American and European farmers are effectively protected from market risk by these policies. The level of PSE is largely determined by the level of world price. Most economists do not pay much attention to the role of agricultural policies in income stability. Yet farm income stability is clearly a prime objective of government policy both in the E.U. and the U.S. and probably elsewhere. We need to turn out attention to this objective if we are to produce policy analysis relevant to real world policy decisions.agricultural policy, market risks, agricultural income, U.S., E.U., agricultural and natural resource economics, Agricultural and Food Policy,

Spatially explicit farming system modelling for an efficient agri-environmental policy design

A mathematical programming model is developed and associated to a spatial pattern index (Ripley L function) to analyse the optimal reserve design and implementation for the Little Bustard conservation in Plaine de Niort. The model structure corresponds to three spatial levels, fields, farm and landscape. Simple in terms of area representation, it is detailed in terms of farm behaviour and spatially explicit. The model is applied in a normative and in a positive way. The major findings of the normative approach relate to the trade-offs between the reserve pattern and its cost. It was found that the environmentally optimal reserve, which is randomly dispersed across the zone, is the most costly one. Within the positive approach, it is illustrated that the various reserve patterns generated within the normative approach can be obtained through relatively simple uniform contract structures. The most effective contract structure is a degressive set of two payments enabling the farms to enroll at least a small share of their land.Biodiversity, spatial optimization, mathematical programming, Environmental Economics and Policy, Farm Management,

Environmental Good Production in the Optimum Activities Portfolio of a Risk Averse Farmer

An analytical framework is proposed for analysis of environmental good production by farmers in the case of price uncertainty. Environmental good production contracted by means of agri-environmental agreements is treated as a risk less option in the farmer's production activities portfolio. Efficient frontiers were generated using mathematical programming farm level models of suckler cow farms in Monts du Cantal, in France. It was demonstrated that for a DARA risk averse farmer: 1) the agreement payment level is not without impact on the farming intensity on parcels not subscribed under the corresponding argi-environmental programme, 2) a lump sum payment matters under uncertainty, 3) the overall impact of the lump sum payment on environmental good production depends on the type of jointness in production of agricultural and environmental goods, and on the level of uncertainty.uncertainty, portfolio optimisation, biodiversity, agricultural policy, mathematical programming, Agricultural and Food Policy, Resource /Energy Economics and Policy, Q12, Q18, Q28,

Impacts du développement des biocarburants sur la production française de grandes cultures

The paper provides an analysis of the impacts of the bio fuel policy on the French arable crop subsector. The model used is a bio fuel supply model composed of an agricultural module and an industrial bio fuel processingule. Our results show that the incorporation target of 7% of bio fuels in transport fuels would lead to a considerable increase in the rapeseed area. In the main producing regions, the rapeseed area would reach approximately a third of the total farmed area. It would not be possible to reach a 10% incorporation target without imports. Furthermore, we analyse the impacts of reaching these production levels on the rapeseed opportunity costs, and show that reaching the incorporation targets will need an increase in rapeseed prices paid to farmers. We calculate the impacts of this opportunity cost increase on the competitiveness of bio fuels with respect to fossil oil, for different levels of oil prices.Agriculture , Bio-fuels , Energy policy , French arable crops