Modelling the Efficiency of Agri-Environmental Payments to Czech Agriculture in a CGE Framework Incorporating Public Goods Approach

Capturing agricultural multifunctionality has been a challenge to agricultural economists for more than a decade. On one hand, researchers increasingly include the provision of environmental protection and landscape maintenance in their commodity based models; on the other hand, there are efforts as contingent valuation to assess the economic value of environmental benefits provided by agriculture. This paper tries to merge both research streams by incorporating supply and demand of landscape as a public good in a CGE framework. The former is done by including an explicit sector of joint commodity and non-commodity production in the model structure; the latter by extending the household demand system of willingness to pay for landscape. The approach is tested on four scenarios which are extensively compared. Research presented in this paper is the result of a research grant MSM 6046070906 "Economics of Czech agricultural resources and their efficient usage within the framework of multifunctional agri-food systems" and a "Research Task of UZEI conducted for the Ministry of Agriculture TÚ 4241/2011"

An Assessment of the Differentiated Effects of the Investment Support to Agricultural Modernisation: the Case of the Czech Republic

Despite being considered as a key instrument of the agricultural development policy, the investment support has received only limited attention in the Czech economic literature. The objective of this paper is to assess economic effects of the measure 121 “Modernisation of Agricultural Holdings” of the RDP 2007-2013 on the Czech farms. A particular focus is on the distribution of the supports and differentiated impacts of the supports according to the production conditions and farm size. The counterfactual approach is adopted, deploying direct matching algorithm with the treatment of hereoscedasticity. We show significant benefits of the investment support in terms of business expansion (represented by Gross value added) and labour productivity improvements. Analysing the sample of applicants for Measure 121 we show that large farms get much larger support than smaller farms. By splitting the sample by natural conditions and by size we demonstrate that benefits are higher on farms in less favoured areas and on medium-size farms in both the absolute and relative terms. Investigating the changes in bank indebtedness we yield an indication that on average the support mobilised additional resources to finance the sector investment. However, there is no statistically significant increase of bank indebtedness on large farms due to investment support. In turn, it can be interpreted that deadweight is rather high on large farms, while on average the deadweight of the investment support programme is rather low. Thus, the programme can improve its social efficiency if it is targeted to small and medium size farms

The Dynamic Effects of Investment Support of the EU Rural Developent Programme on Czech Farms' Structure and Performance

The objective of the paper is to assess economic and structural effects of the measure “Modernisation of Agricultural Holdings” of the Rural Development Programme 2007-2013 on the Czech farms. A particular attention is paid to its dynamic and time-differentiated impacts. We use Direct Covariate Matching to address issues of potential selection bias, simultaneity bias or functional form misspecification. Our empirical results show significant short as well as long-term investment support effects, which, however, markedly vary between support periods. This may relate to the rapidly changing overall financial and investment conditions for agriculture. The investment support of the earlier period of 2008-2011 which overlaps with the time of economic crisis is found to have larger and more significant structural and performance effects than later investment support. It resulted in significant ruminant production expansion at the expense of farm cost efficiency, but contributed to a short-term TFP increase. These effects of support vanished in the latter periods characterized by favourable financial conditions. For this period, we find negative effects of investment support on total factor productivity that could indicate loss of additionality of investment support and/or differences in type of investments and their productivity realized by supported and non-supported farms