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The IDEMA2 project

Uncertainty regarding the impacts of the 2003 reform due to its radical nature - as well as the concerns voiced in the public debate - highlighted the need to provide comprehensive assessment of the impacts of decoupling on the EU farm sector. Accordingly, the European Community’s Sixth Framework Programme included, under the heading of CAP reform, a call entitled: “Decoupling - Development of various tools and methods for the impact assessment of decoupling.” The assignment was to assess the impact of combining existing direct payments into a decoupled income support scheme and in particular to quantify the impact on:

  • • supply, demand, trade and prices for major commodities;
  • • localisation of production;
  • • land market and prices;
  • • farm income and structural adjustment of holdings;
  • • entries and exists from the agricultural sector; and
  • • land use and environmental impacts.

The IDEMA project was organised to respond to the above objectives. The research was performed by nine partners in eight countries, with the AgriFood Economics Centre in Sweden as coordinator. The choice of approach for IDEMA was influenced by two main factors: the radical nature of the reform, and the complexity and immensity of the issues to be addressed. The radical nature of the reform implies limited possibilities to generalize from past experiences. Further, the reform was implemented after the project started; hence there was no historical data that could be used in econometric analyses. As the implications of decoupling are multifaceted, no single methodological approach was considered sufficient; rather, a multiplicity of complementary approaches was applied. Accordingly, the project was organised around the following three approaches:

  • • survey-based analysis of farmers’ strategic decisions,
  • • dynamic agent-based regional modelling with AgriPoliS, and
  • • sector-level and general-equilibrium modelling with the European Simulation Model, ESIM (Balkhausen and Banse, 2005).

The different approaches complement each other as they can answer different questions on the possible impacts of decoupling agricultural support. The need to analyse the expected reaction of agriculture at different scales (European Union, national and regional) made necessary the use of different models. Agent-based regional modelling is appropriate to analyse impacts on for example structural change (development towards fewer and larger farms), while sector-level modelling is suited for analysing impacts on, e.g. product markets. These modelling approaches can be contrasted with results from surveys that investigate how farmers intend to react to decoupling. The methodological approaches are also complements with respect to their weaknesses. Surveys of farmers’ intentions are biased by farmers’ expectations about policy evolution. On the other hand, models are limited by the behavioural assumptions on which they are based. By combining and extending the three main approaches and applying them simultaneously to a sample of member states, the project was able to cover the most important potential impacts of decoupling CAP support from production. In this chapter, we focus on the results of the survey and agent-based regional modelling. Aggregate effects of decoupling are covered by a range of other studies (see Balkhausen et al., 2008 for an overview). Environmental impacts are presented in the paper by Brady (2010) in the proceedings from this workshop.

 
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