Recent reforms of agricultural policies in developed countries have introduced direct payments as replacements for traditional production‐enhancing instruments. Whereas these new instruments can, in principle, influence production through several channels, current empirical studies show no significant impact on production; direct payments mainly increase land values. In this article, we revisit the evaluation of the coupling effects passing through the wealth of agricultural households. The initial wealth of these agents, while mainly being in the form of land asset holding, is always assumed to be fixed. To the contrary, we show theoretically and through an empirical simulation exercise that once the impact of farm programs on initial wealth is properly accounted for, the measure of the coupling effects is not as negligible as found in previous studies.

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Although there is now widespread evidence of substantial variability in economic agents' responses to economic drivers in many applied economics fields, this variability has been largely overlooked by econometric agricultural production models. This article sets out to fill this gap by providing methodological contributions and empirical results. First, we consider panel data multicrop models featuring random intercept and slope parameters to account for the heterogeneous responses of crop producers to economic drivers. Second, we show that Monte Carlo expectation‐maximization algorithms are particularly well‐suited to estimating this type of model. Third, based on an application of our empirical modeling framework with a sample of French grain crop producers, we demonstrate substantial variability in farmers' responses to economic incentives. Fourth, we use the estimated model and a simple “statistical calibration” procedure to build farm‐specific simulation models, which are then used to evaluate the effects of the rapeseed price increase induced by European Union (EU) biofuel support. Our simulation results demonstrate that ignoring the variability in the considered farmers' responses to the economic incentives results in significant overestimation of the increases in rapeseed yield levels and variable input use levels induced by EU biofuel support, as well as significant underestimation of the variability in the congruent increases in rapeseed acreages.

The main objective of this article is to examine econometric estimates of price elasticities of food trade functions. We investigate the relevance of the prominent gravity approach. This approach is based on the assumptions of symmetric, monotone, homothetic, Constant Elasticity of Substitution (CES) preferences. We test all these assumptions using intra-European trade in cheese. In general, the assumptions made on preferences by the gravity approach are not supported by our dataset. The bias induced in the estimated price elasticities is ambiguous. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The Agricultural Economics Society.

The highly disputed effects of agricultural trade liberalisation are mostly simulated with static models. Our main objective in this paper is to evaluate the robustness of the static simulation results to the consistent modelling of dynamic behaviours and to the linked specification of price/return expectations. Focusing on a complete trade liberalisation scenario of arable crop markets by developed countries, we find that available static results are quite robust to dynamic specifications and to most expectation schemes. Endogenous market fluctuations due to expectation errors may appear following trade liberalisation. These fluctuations are nevertheless limited by the many feedback effects revealed by our general equilibrium framework.