Potential of differentiated payment levels based on standard cost approaches: A case study of selected rural development measures in Germany Report as inadecuate




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In accordance with EU regulations, payment levels for several measures of ruraldevelopment programs are calculated on the basis of standard cost approaches, using'typical’ or average figures for costs incurred and income forgone. Resulting uniformpayment rates have been frequently discussed and criticised as being inefficient,having a low cost-effectiveness and generating excessive windfall profits. However,few empirical studies exist which quantitatively examine potentials of a moredifferentiated standard cost approach. By using German farm accountancy data, thisstudy analyses effects of a payment differentiation according to regional and farmindividual characteristics on producer rents, budget expenditures and economicefficiency. Preliminary results show that though overcompensation could be reduced inmost cases, savings in budget expenditure are often small and might be even offset byincreasing administration costs. Generally our analysis indicates that potential benefitsof differentiated standard cost approaches can be partly exploited if a) variances of thecost of participation in the universe of farms are high and the discriminatory natures ofdifferentiation are significant, and b) positive correlations between costs andenvironmental benefits are strong.

Keywords: differentiated payment levels ; efficiency ; cost-effectiveness ; standard costapproach ; rural development schemes ; agri-environmental measures

Issue Date: Mar 30 2008

Publication Type: Conference Paper/ Presentation

PURL Identifier: http://purl.umn.edu/36866

Total Pages: 19

Record appears in: Agricultural Economics Society > 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK





Author: Offermann, Frank ; Nieberg, Hiltrud ; Hecht, Judith

Source: http://ageconsearch.umn.edu/record/36866?ln=en



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