Efficiency of Alternative Policies for the EC's Common Agricultural Policy

Abstract

Abstract The Common Agricultural Policy (CAP) of the European Community (EC) is facing a crisis from budgetary and political pressures. This study analyzes the relative efficiency of four policy options discussed at the recent emergency summit in Brussels including a price reduction, coresponsibility levies, production controls, and a two‐price plan. These are assessed in terms of their efficiency in achieving producer welfare. A two‐price plan is superior to a production quota only at lower producer income goals. A price reduction policy is more efficacious than a coresponsibility levy, but both are shown to be inferior to either quotas or a two‐price plan.