2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182733, European Association of Agricultural Economists.
Doi
Abstract
peer-reviewedThe current structure of agricultural production is still influenced by historical coupled
payments, even though it has been eight years since decoupled payments were introduced.
Much of the expansion in the Irish cattle herd that occurred during the era of the MacSharry
reforms is still visible. In this paper we consider the incentives associated with the Common
Agricultural Policy (CAP) over time in relation to production. Our primary focus is on
subsidies that were available to the beef sector, and we investigate the behavioural pressures
associated with these incentives. We have developed a Hypothetical microsimulation model
using a typical farm, based on plausible values taken from the Teagasc National Farm Survey
(NFS) 1995. We are investigating if subsidies available to the beef sector in Ireland through
the CAP since 1984 resulted in non-linearity in the Direct Payment Schedule faced by cattle
farmers, and if so where were these kinks and what were the behavioural pressures associated
with these incentives? Identifying non-linearity in the Direct Payment Schedule indicates
where incentives occurred. Large kinks are associated with large incentives at that point. We
calculated a total payment for each subsidy from 1984 to 2014, and constructed a Direct
Payment Schedule that varies by stocking rate. We find that subsidies, and in particular the
CAP reform payments of the MacSharry era introduced large discontinuities or kink points in
the Direct Payment Schedule of beef farmers, indicating that there were large incentives for
farmers to produce at or just before these points