A Bayesian econometrics and risk programming approach for analysing the impact of decoupled payments in the European Union

We estimate a risk-based programming, individual farm model and apply it to studythe wealth effects of crop-related, decoupled direct payments under the EuropeanUnion (EU) Common Agricultural Policy. The model expands on previous work onestimating risk-based programming models by applying a robust Bayesian economet-ric framework. The results indicate that the wealth effect varies greatly betweenindividual farms, but that its impact on aggregate crop production is small. For largerfarms, in particular, removing the decoupled payments, while keeping total landconstant, increases the diversity of the cropping plan.