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PLoS One. 2012;7(8):e41225. doi: 10.1371/journal.pone.0041225. Epub 2012 Aug 2.

How to design a targeted agricultural subsidy system: efficiency or equity?

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  • 1Centre for Environmental and Climate Research, Lund University, Lund, Sweden.


In this paper we appraise current agricultural subsidy policy in the EU. Several sources of its inefficiency are identified: it is inefficient for supporting farmers' incomes or guaranteeing food security, and irrational transfer payments decoupled from actual performance that may be negative for environmental protection, social cohesion, etc. Based on a simplified economic model, we prove that there is "reverse redistribution" in the current tax-subsidy system, which cannot be avoided. To find a possible way to distribute subsidies more efficiently and equitably, several alternative subsidy systems (the pure loan, the harvest tax and the income contingent loan) are presented and examined.

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