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12.11.2009 Studies
 
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The Implementation Costs of Agricultural Policies

OECD, 2007

Content

  • general discussion of the transaction costs of agricultural policies (designing, implementing, monitoring and evaluating policies) and literature overview
  • case studies from Mexico, Switzerland (interesting) and the United States
  • estimates of transaction costs for different policies (p. 34 and 57)

Findings

  • transaction costs are difficult to measure and to compare across policies and countries
  • transaction costs differ strongly across policies and countries; they can be much reduced through best practices (especially by the use of information technologies)
  • high setup costs for a program can be seen as an investment because 1) transaction costs fall over time and with more participating farmers, and 2) higher transaction costs at an early stage can reduce costs later on (e.g. precise geographical targeting of farmers can reduce the number of contracts that have to be administered; creating support through a bottom-up approach can reduce monitoring costs)
  • the advantages of targeting policies at desired outcomes outweigh the increased transaction costs for a very broad range of parameters

Comment

  • the study shows that the higher transaction costs of well-targeted measures, such as agri-environmental payments, are no excuse for maintaining poorly targeted policies, such as the Single Farm Payment or the current Least Favored Area scheme