Modelling the Efficiency of Agri-Environmental Payments to Czech Agriculture in a CGE Framework Incorporating Public Goods Approach

Capturing agricultural multifunctionality has been a challenge to agricultural economists for more than a decade. On one hand, researchers increasingly include the provision of environmental protection and landscape maintenance in their commodity based models; on the other hand, there are efforts as contingent valuation to assess the economic value of environmental benefits provided by agriculture. This paper tries to merge both research streams by incorporating supply and demand of landscape as a public good in a CGE framework. The former is done by including an explicit sector of joint commodity and non-commodity production in the model structure; the latter by extending the household demand system of willingness to pay for landscape. The approach is tested on four scenarios which are extensively compared. Research presented in this paper is the result of a research grant MSM 6046070906 "Economics of Czech agricultural resources and their efficient usage within the framework of multifunctional agri-food systems" and a "Research Task of UZEI conducted for the Ministry of Agriculture TÚ 4241/2011"