The impact of pillar I support on farm choices: conceptual and methodological challenges

In the near future the CAP will continue to be structured around two pillars. In the first pillar the main instrument for producers’ support is the decoupled Single Farm Payment. In this paper we review the methodological framework for analysing decoupled payments in models of agricultural production. Market and technological uncertainty, credit constraints, farm household choices involving extra-agricultural decisions, policy uncertainty and long-run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis. Future research should refine the analysis of decoupled payments, mainly trying to provide results that can be useful for policy simulation, to bridge the gap between analysis at the individual level and sector policy models.