Essays on the inefficiency of Norwegian agricultural policy

Efficiency losses in milk marketing boards – the importance of exports Co-authored with Rolf Jens Brunstad and Erling Vårdal. Published in Nordic Journal of Political Economy. A milk marketing board (MMB) is a well known instrument for regulating the markets for dairy products. MMBs are based on price discrimination, and receipts from sales are pooled so that the farmers receive a single price adjusted for composition and quality. Using a numerical model, we find that the economic welfare cost of the Norwegian MMB, is as much as 26.3% of the milk production value. This computed cost is far larger than for the other countries with MMBs. The main reasons are that exports are a major ingredient of the Norwegian system, and that production costs are very high. Multifunctionality of agriculture: An inquiry into the complementarity between landscape preservation and food security Co-authored with Rolf Jens Brunstad and Erling Vårdal. Published in European Review of Agricultural Economics. Without support, the levels of agricultural public goods like food security and landscape preservation would fall short of demand in high-cost countries. However, as demonstrated by Norway as a case study, the current level of support is disproportionate from a public goods perspective, and the policy instruments are badly targeted at the public goods in question. Because agricultural land is a major component of both food security and landscape preservation, giving rise to a high degree of cost complementarity between the public goods, Introduction Essays on the inefficiency of Norwegian agricultural policy 7 it would be more efficient to support land-extensive production techniques than production per se. A better targeted policy on environmental services may lead to a larger relative PSE: a paradox illustrated by the case of Norway Co-authored with David Blandford, Rolf Jens Brunstad and Erling Vårdal. Revise and resubmit in European Review of Agricultural Economics. The producer support estimate calculated by the OECD is widely used as an indicator of distortions created by agricultural policies. When considering conventional agricultural policy grounded on production subsidies, the relative (percentage) PSE and inefficiencies are highly correlated. However, we demonstrate that this is not necessarily the case if policy is targeted to correcting externalities associated with agricultural activity. In particular, a welfare enhancing reform involving a shift from production subsidies to payments for the supply of public goods may result in a lower absolute PSE and lower trade distortions but a higher relative PSE. Agriculture versus fish – Norway in WTO Published in Food Policy. The Norwegian agriculture is highly protected and subsidised. The opposite is the case for fisheries and fish farming which suffer from foreign market restrictions. Using a computational general equilibrium model, the gain for Norway of a complete elimination of food subsidies and tariffs is estimated to be in the range of 1.2 2.7 per cent of GDP. Most of this gain stems from domestic farm sector liberalisation. The gain from free market access for seafood is estimated to 4.4 per cent of the seafood export value. Consequently, Norway has much to gain from offering other countries market access for agricultural products. By pursuing such a policy, Norway may also strengthen the case for fisheries and fish farming in trade talks. Modelling farmers’ labour supply in agricultural models Micro-based research on farm households’ allocation of time suggests that farm labour is partially sector-specific, i.e., that reallocation of farm labour as a response to change in the Introduction Essays on the inefficiency of Norwegian agricultural policy 8 relative wage between on-farm and off-farm work is sluggish. This evidence is rarely reflected in numerical models aimed at policy evaluation which most commonly assume either perfectly mobile or totally sector-specific farm labour. To overcome these restrictive model assumptions, a constant elasticity of transformation (CET) function can be adopted. The CET approach to represent farm household preferences for on-farm work, or specific taste for farming, is in this paper demonstrated and interpreted. Using the Norwegian agricultural sector as an example, the paper clearly shows that farmers’ preferences for onfarm work are of vital importance as to how a liberalisation of farm policy affects farm output and farmers’ income. The results depend on technology, i.e., to what degree costs can be reduced by replacing hired labour, capital and other factors with cheaper family labour.