Analysing Farm-specific Payments for Norway using the Agrispace Model

Abstract

Norway maintains a complex system of activity or type specific coupled paymentswhich account for a large share of farm income. Most of the payment rates arenegatively related to farm size and are higher in remote areas compared to centralregions. We present and use a newly developed recursive-dynamic multi-commoditymodel (Agrispace) with CES production functions depicting regional farm clustersderived from the full farm population. Using this model, we simulate impacts ofcurrent and alternative subsidy policies on production, prices, input use, incomeand farm structural change. Mapping cluster results to each farm along with beha-vioural rules allows estimation of individual profits and farm exits. Our results indi-cate that, in the short run, the current policy regime seems to support the policyobjective of maintaining a variety of farms in all parts of Norway. In the long run,farm structural change is less affected by a policy reform that leaves total supportlevels unchanged.