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The paper introduces a general methodological approach for the estimation of constrained optimisation models in agricultural supply analysis. It is based on optimality conditions of the desired programming model and shows a conceptual advantage compared with Positive Mathematical Programming in the context of well-posed estimation problems. Moreover, it closes the empirical and methodological gap between programming models and duality-based models with explicit allocation of fixed factors. Monte Carlo simulations are performed with a maximum entropy estimator to evaluate the functionality of the approach as well as the impact of empirically relevant prior information with small samples.

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This review presents machine learning (ML) approaches from an applied economist’s perspective. We first introduce the key ML methods drawing connections to econometric practice. We then identify current limitations of the econometric and simulation model toolbox in applied economics and explore potential solutions afforded by ML. We dive into cases such as inflexible functional forms, unstructured data sources and large numbers of explanatory variables in both prediction and causal analysis, and highlight the challenges of complex simulation models. Finally, we argue that economists have a vital role in addressing the shortcomings of ML when used for quantitative economic analysis.

Keywords: Bio-economic model Integrated assessment Environmental policy Market liberalizationThe disciplinary nature of most existing farm models as well as the issue specific orientation of most of the studies in agricultural systems research are main reasons for the limited use and re-use of bio-economic modelling for the ex-ante integrated assessment of policy decisions. The objective of this article is to present a bio-economic farm model that is generic and re-usable for different bio-physical and socio-economic contexts, facilitating the linking of micro and macro analysis or to provide detailed analysis of farming systems in a specific región. Model use is illustrated in this paper with an analysis of the impaets of the CAP reform of 2003 for arable and livestock farms in a context of market liberalization. Results from the application of the model to representative farms in Flevoland (the Netherlands) and Midi-Pyrenees (France) shows that CAP reform 2003 under market liberalization will cause substantial substitution of root crops and durum wheat by vegetables and oilseed crops. Much of the set-aside área will be put into production intensifying the existing farming systems. Abolishment of the milk quota system will cause an increase of the average herd size. The average total gross margin of farm types in Flevoland decreases while the average total gross margin of farms in Midi-Pyrenees increases. The results show that the model can simúlate arable and livestock farm types of two regions different from a biophysical and socio-economic point of view and it can deal with a variety of policy instruments. The examples show that the model can be (re-)used as a basis for future research and as a comprehensive tool for future policy analysis.