1. WP4 Assessment of the CAP reform on farmers’ economic performance Alfons Oude Lansink Business Economics, Wageningen University

2. Overview Researchers Objectives Work description Workplan

3. Researchers Alfons Oude Lansink (Chair of Business Economics) Arno van der Vlist (Assistant Professor of Business Economics) Researcher (to be employed)

4. Objectives  Develop micro economic model for explaining impact CAP reform on farmers’ performance. Various measure performance (technical, allocative efficiency, technical change) Role of various factors in explaining farm performance  Analyse impact of CAP reform on farm performance

5. x1x1 Work description: Technical Efficiency 0 x2x2 L(y) xAxA λ A x A TE= λ A

6. x1x1 Cost Efficiency and Allocative Efficiency 0 x2x2 L(y) xAxA λ A x A θ A x A -w 1 /w 2 AE = θ A / λ A CE = θ A CE = TE × AE

7. y Cost, Allocative and Technical Efficiency 0 C(w,y) xAxA λ A x A θ A x A w’x A w’λ A x A w’θ A x A

8. Empirical methods Two basic methods are possible Estimating Production and Cost frontiers and make decomposition using CE = TE × AE Estimate shadow cost frontier and make decomposition First method will be shown here

9. Stochastic Production Frontier General specification x i represent production factors (labor, capital, etc.) v i, ε i and u i are error terms (u i is technical efficiency term) Model can be extended to explain technical efficiency and to allow for latent classes

10. Stochastic Cost Frontier General specification v i, ε i and u i are error terms (u i is cost efficiency term) Model can be extended in a similar way as the production frontier model

11. Data requirements Stage 1: FADN data on inputs, outputs and prices of farms from 3 regions (Greece, Netherlands and Sweden) on variables for explaining cost efficiency, technical efficiency and allocative efficiency (also coming from WP2?) Sufficiently large number of observations and years Stage 2: data from PMP model, after allowing for structural changes, similar to Stage 2 data Note: Choice of agricultural sectors?

12. Workplan Task 4.1 (month 1-6) Working out theoretical model (P2, P5) Task 4.2 Development of a quantitative model for the impact of CAP reform on performance (month 6-12) Composing FADN data base of three regions (P4, P5, P6, P8) Estimation of production/cost frontiers on FADN data (P5) Task 4.3 Impact of CAP on performance (month 20) Estimate frontiers on PMP data (P3, P5) Computation of effect CAP using new ‘PMP’ data (P5) Analysing results and writing final report (All Partners except P7)

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