Modelling Regional Agricultural Output Adjustments in Scotland in Response to CAP Reform

The purpose of the paper is to present an agricultural supply model for Scotland used to estimate regional changes in agricultural outputs due to the 2003 Common Agricultural Policy (CAP) reform. Supply functions were estimated for several farm types based on generalised trans-logarithmic multiproduct cost functions (Caves, Christensen and Tretheway, 1981). The data used for the estimation were an unbalanced panel dataset constructed using farm level data from the Scottish Executive’s Farm Accounts Scheme (FAS) survey. Using the estimated supply adjustments, individual farm level responses to subsidy and price changes were aggregated using agricultural census weights to estimate the output changes for different regions.