Using Principal-Agent Theory to Deal with Output Slippage in the European Union Set-Aside Policy

Fraser, Robert (2001) Using Principal-Agent Theory to Deal with Output Slippage in the European Union Set-Aside Policy. Journal of Agricultural Economics, 52 (2). 29 - 41. ISSN 0021-857X. (The full text of this publication is not available from this repository)

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Abstract

This paper proposes modifications to the existing EU set-aside policy which are designed to alleviate the problem of output slippage associated with heterogeneous land quality by using "incentive-compatible" mechanisms drawn from principal-agent theory, Specifically it is suggested that there should be differential reference yields based on land quality to discourage the "adverse selection" of lower quality land for set-aside, and that the scope of set-aside monitoring should be expanded to include both the quantity and the quality of land set-aside so as to discourage "moral hazard" problems, The potential of these modifications is illustrated using a numerical analysis, which is also used to evaluate the role of a range of factors which determine the set-aside decision. Finally, an estimate of the "benefits" from reducing slippage required to justify the costs of including these modifications is provided.

Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Robert Fraser
Date Deposited: 30 Aug 2008 18:26
Last Modified: 19 May 2014 13:56
Resource URI: http://kar.kent.ac.uk/id/eprint/5181 (The current URI for this page, for reference purposes)
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