MODELLING THE EFFECTIVENESS OF CROSS-COMPLIANCE UNDER ASYMMETRIC INFORMATION

The effects of cross-compliance depend on the strategies of participation/compliance of farmers, as well as on the ability of public administration to design appropriate mechanisms of control and sanctions. The objective of this paper is to present a reference framework for the analysis of cross-compliance under asymmetric information and to test the empirical relevance of the problem. The methodology is applied to a case study represented by the province of Bologna (Italy). The results show that, in the present conditions of control and sanctions, only a small share of farms is interested in complying with cross-compliance. The profitability of the choice of compliance/noncompliance depends mainly on the amount of single farm payment entitlements compared with the total land.. The main message, however, is that, in order to increase effectiveness, environmental prescriptions as well as control effort should be considered as a variable to be adapted to incentive compatibility criteria.