| The Common Agricultural Policy has radically been reformed in 2003 with the introduction of “decoupled” direct payments. Economic theory suggests that direct payments are expected to have no impact on production in a static deterministic environment with perfect markets for capital and labour. But if factor market imperfections or uncertainty are taken into account, this is no longer true. Taking into account these potential impacts, the empirical literature has studied the impacts of farm payments. However, most studies are based on assumptions such as perfect markets, risk neutrality or static environment. Recent researches have also often neglected the role of debt constraints. The paper develops and numerically solves a dynamic stochastic farm... |
