Evaluation of Agro-environmental Policy through a Calibrated Simulation Farm Model

This paper evaluates the production and income effects from the adoption of one popular agro-environmental measure, which concerns buffer strips along field edges, on a representative sample of crop farms in Belgium taken from the Farm Accountancy Data Network database. We represent the economic behaviour of each crop farm with a profit-maximisation programming model that embeds an estimated ex-ante flexible cost function. We calibrate the simulation model using the Positive Mathematical Programming approach. Accounting for farm and regional heterogeneity, simulation results show how crop farms may respond differently to incentives for the agroenvironmental measure. Results demonstrate that economic incentives can be an effective mechanism for encouraging uptake of agro-environmental measures and that impacts of agro-environmental measures can vary by farm and region, depending on agronomic conditions and the environmental potential for agro-environmental measure activity