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Multifunctional agriculture: The effect of non-public goods on socially optimal policies

Ollikainen, Markku and Lankoski, Jussi (2005) Multifunctional agriculture: The effect of non-public goods on socially optimal policies. MTT Agrifood Research Finland.

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Document available online at: http://www.mtt.fi/english/publications/dp/2005/DP2005_1.pdf


We develop a general framework for multifunctional agriculture, which includes not only public goods but also rural viability as a non-public good item. We contribute to the literaure in two ways. First, we demonstrate how the broader definition of multifunctional agriculture differs from the agri-environmental multifunctionality, and how agri-environmental policy should be reformed to include these aspects. We show that rural viability entails adjusting fertilizer tax and buffer strip subsidy below their first-best Pigouvian levels to reflect the direct and indirect employment effects of agricultural production. Moreover, we show that when non-agricultural land use is present, an additional, non-agricultural instrument is needed to adjust the amount of land allocated to agriculture to its optimal level. In a parametric model calibrated to Finnish agricultural conditions and Finnish valuation of agri-environmental amenities and rural viability, we assess how the socially optimal provision of non-public good multifunctionality relates the socially optimal agri-environmental multifunctionality.

EPrint Type:Report
Keywords:biodiversity, employment, nutrient runoffs, rural viability
Subjects: Environmental aspects
Research affiliation: Finland > Luke Natural Resources Institute
Related Links:http://www.mtt.fi/english
Deposited By: Koistinen, Riitta
ID Code:16615
Deposited On:30 Dec 2009 11:14
Last Modified:12 Apr 2010 07:42
Document Language:English
Refereed:Not peer-reviewed
Additional Publishing Information:MTT Discussion Papers 1 2005

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