Hervé Guyomard

Unconditional Elasticities in Two-Stage Demand Systems: An Approximate Solution

Two-stage budgeting postulates that the consumers utility maximization decision can be decomposed into two steps. In the first stage, total expenditure is allocated over broad groups of goods. In the second stage, group expenditures are allocated over elementary commodities. In this article, we assume that the current weighted true cost-of-living price indices defined for each broad group of elementary commodities vary only very slightly with sub-utility levels. Hence, it is possible to approximate the first stage of a two-stage budgeting structure by a maximization problem involving a single price index and a single quantity index for each of the broad groups. Relationships between conditional and unconditional expenditure and price elasticities are derived within this context. Copyright 2001, Oxford University Press.

Modelling labour decisions of French agricultural households

A joint model of labour decisions for farm couples is presented. Attention is given to operator and spouse participation decisions in the off-farm labour market as well as the decision to use hired farm labour. Farm household labour choices, which include both on-farm and off-farm work decisions, and hired labour decisions, are thus modelled as a household joint process. The model is applied to a sample of French farm households. Empirical results illustrate the importance of spouse decisions on off-farm labour participation and supply function structure. They also show that operator labour and hired farm labour are complementary, but wife labour and hired farm labour are substitutable.

Eating patterns and food systems: critical knowledge requirements for policy design and implementation

Eating patterns are important for building sustainable food and agricultural systems. This paper begins by presenting the main features of eating patterns worldwide. These eating patterns include the relative convergence of diets, more rapid food transition in emerging and developing countries, development of a more complex food chain, and substantial food losses and waste at distribution and final consumption stages. These patterns have negative consequences on health and the environment. The drivers of these patterns are examined to identify knowledge gaps, the filling of which should facilitate the design and implementation of actions and policies aimed at making food systems more sustainable.

Taxes and Subsidies in Vertically Related Markets

In the framework of a two-country, two-good partial equilibrium model where one of the commodities (the bulk commodity) is an intermediate input in the production of the second good (the processed good), we assume that the government wishes to transfer income to both bulk commodity and processed good producers. Our analysis is concerned with efficient redistribution. The instruments are subsidies or taxes, and there is an opportunity cost of public funds. We use the targeting principle to characterize the set of optimal subsidies or taxes applied on both the bulk commodity and the final good in this vertically related market structure. The theoretical analysis is illustrated using the example of cereals (the bulk commodity) and pork and poultry (the processed good) in the European Union.

Impact of the 1996 US FAIR Act on the Common Agricultural Policy in the World Trade Organisation context: the decoupling issue

Abstract The United States (US) Federal Agriculture Improvement and Reform (FAIR) Act of 1996 represents a watershed, not only from a domestic point of view but also from the perspective of the next round of international agricultural negotiations. In particular, it will force the European Union (EU) to reform its agricultural policy so that compensatory payments for support price cuts are included in the green box or, at least, are much more decoupled than at present. US exports of several agricultural products, including maize, pork and poultry meat, barring a prolonged global economic downturn, should increase substantially over the 7-year period of the Act and beyond. Accordingly, the US will certainly attempt to ensure that trade barriers with the EU and subsidised competition from the EU in third markets are kept to a minimum. Though the 1999 EU proposals for a new reform of the Common Agricultural Policy (CAP) represent a courageous step in the right direction, they are likely to be insufficient to comply with future World Trade Organisation (WTO) commitments, in particular with regard to the decoupling of direct aid payments. We have made a number of proposals for an internal support policy which explicitly recognises that European farmers have several functions that require specific forms of public intervention and which should comply with future WTO requirements.

Derivation of Long-run Factor Demands from Short-run Responses

The concept of the restricted cost function provides a dual approach to the analysis of short-run technology. It allows also, under curvature restrictions, inference of the different possible equilibria, according to constraints on the firms. Moreover, in this paper, the properties of the restricted cost function are spelled out. Substitution possibilities related to the different regimes are also derived from the restricted cost function. This theoretical framework is applied to characterize the French cereal-producing sector by using a cross-section of farms.

European Biofuel Policy: How Far Will Public Support Go?

The strong biofuel expansion experienced in the European Union (EU) originates in the incentives set up by Member States (MSs) within a global framework provided by the EU. A significant part of the EU rapeseed production (more than half) is now channeled into the energy market. MSs support the development of biofuels through subsidies/tax exemptions, mandatory blending, and import barriers (at least for ethanol). Several motivations for supporting biofuels have been put forward. For some MSs, the motivation was clearly to increase agricultural income (e.g., in France and Germany). In other cases, biofuels (produced domestically or imported) were mainly seen as a means to abate GHG emissions. Public support for biofuels has recently been questioned. Some potentially negative effects of biofuels (most notably the indirect land use change) have fueled the debates in the EU Parliament and Commission over the adoption of the 2008 Renewable Energy Directive. These discussions have led to the adoption of less stringent mandatory incorporation targets for 2020 (with respect to the initial 2007 proposal), as the objectives are now set in terms of “renewable fuels” (i.e., biofuels, hydrogen, and green electricity). In spite of an agreement on targets for 2020, some important questions still need to be addressed. The indirect land use change triggered off by biofuel production is the most critical. The ability of the Commission to come up with a clear methodology to address this issue is a necessary condition for the enforcement of the biofuel targets.

Tariff protection elimination and Common Agricultural Policy reform: implications of changes in methods of import demand modelling

The study proposes a way for accommodating the traditional Armington assumption to capture the possibility for a country to import imperfect substitutes as well as perfect substitutes for domestically produced goods. When this possibility is incorporated into a modelling framework, then a Common Agricultural Policy elimination scenario, including the setting to zero of import tariffs, would have starker implications than many studies suggest. To illustrate this point, a Computable General Equilibrium (CGE) model of the French economy is used, highlighting agricultural and food sectors. The study analyses the consequences for the French economy of a complete liberalization scenario in the European sector of cereals.

Agricultural Export Subsidies and Intermediate Goods Trade: Comment

Paarlberg examines the impact of an export subsidy policy when one good is an intermediate input in production of a higher-value product (HVP) which is also exported. His analysis suggests that the sector receiving the subsidy is one that benefits, while an export subsidy on one good can cause the home countrys price for the other good to rise or fall, depending on the relative subsidized commodity excess demand and supply elasticities, and the relative composition of the home and foreign sectors. Paarlbergs analysis relies on a two-country, two-good, sector-specific factor partial equilibrium model. In each country, the two goods are produced under competitive conditions using technologies with constant returns to scale. The comparative statics of a home country export policy are determined through holding the industry-specific factor supplies constant and by assuming no policy intervention initially. Furthermore, in order to facilitate interpretation of the comparative static results, Paarlberg assumes that the technologies in the processing sectors of the two countries are identical, i.e., that per unit factor uses of the home and foreign HVP industries are identical for all equal factor prices. Deriving Paarlbergs comparative static results can be difficult, due to typographical errors and/or cumbersome calculations, particularly in the appendix. Perhaps this comment can then be of some assistance in so far as we show that Paarlbergs central results may readily be obtained and interpreted from the definition and the properties of export supply functions (Dixit and Norman, Feenstra). Our analytical framework is based on the use of sectoral restricted profit functions rather than unrestricted cost functions. It is more general than Paarlbergs framework in so far as we do not assume that elasticities of substitution in the HVP industries for the two countries are identical and we do not necessarily assume that returns to scale are constant. We define

Impacts of agricultural policies on crop land prices

Abstract We develop a Ricardian model with heterogeneous land quality to analyze the effects of agricultural and agri-environmental policies on crop land prices. Four policy instruments are considered: a uniform area payment, a quality-dependent area payment, a mandatory buffer strip policy, and a voluntary buffer strip payment under the current single farm payment and the previous more coupled support system. We also examine how general tax and monetary policies affect crop land prices. An empirical model applied to Finnish agriculture shows that both types of area payments capitalize fully in land prices. The quality-dependent area payments lead to higher land prices but also to higher environmental quality. Voluntary environmental policies do not increase the average crop land prices. Finally, macroeconomic factors such as general tax and monetary policies may exert a greater impact on crop land prices than some relatively minor fine-tuning in agri-environmental policies.