Predicting the effects of Common Agricultural Policy reform on two French agricultural regions: Application of a bio-economic model

In order to predict changes in production techniques generated by modifications in the price structure, the usual microeconomic approach is based on the construction of production functions estimated by econometric methods. We propose a different way to analyze the effects of these policy changes, based on an economic model associated with an agronomic simulation model, EPIC (Erosion Productivity Impact Calculator). This tool allows us to simulate the optimizing behavior of the producer in his/her agronomical universe, predicting the consequences of technical choices on some environmental parameters such as nitrate pollution. We apply this methodology to predict the effects of the Common Agricultural Policy reform (CAP) in two grain-producing French regions : Toulouse agricultural plain (South West) and La Beauce (Centre). The model predicts an evolution toward less intensive production techniques, and changes in the crop pattern. The real changes that took place in the first two years of the reform have been quite close to the model predictions.