Distortions in a multi-level co-financing system: the case of the agri-environmental programme of Saxony-Anhalt



Agrarwirtschaft 56 (2007), Heft 7

Figure 3. Difference of the budget allocation to the reference
situation in the considered scenarios



Source: own calculations


is increased by 9.49 Mio. €. M8 now receives a budget of
5.11 Mio. € and M9 of 8 Mio. €, as the upper bound for
grassland is binding and these measures do not use any
grassland (table 1, row 9).

In scenario B, the overall budget decreases by 7.354 Mio. €,
while the regional budget of Saxony-Anhalt again remains
constant. This change of the amount of external funding
results from a decrease of the EU budget by 11.624 Mio. €
and an increase of the federal budget by 4.270 Mio. €. In
comparison to the reference situation, the budget of M6
decreases by 14.430 Mio. €, while the budget of M3 in-
creases by 4.430 Mio. € and the budget of M1 increases by
2.650 Mio. €. In this situation the importance of MSL
measures rises, as the federation is co-financing 60% of the
regional share for MSL measures. The previously financed
M6 becomes too costly and is substituted by MSL measures
even though these measures have lower objective coeffi-
cients (table 1, row 4 and 5).

As a result, Saxony-Anhalt is faced with two opposite stra-
tegic options arising for the case that the “objective 1”
status is kept or lost after the decisions of Luxembourg. If
the federal state retains “objective 1” status, VNS measures
would gain priority. If the “objective 1” status is lost, MSL
measures would be strengthened diminishing the decline of
external EU co-financing.

In the lump-sum scenario, there are only four
measures in the optimal solution of the pro-
gramming approach - M2, M3, M4 and M6.
Compared to the reference situation, the
budget of M3 is reduced by 5.49 Mio. €, the
budgets of M5 and M7 are reduced to zero,
while the budget of M6 is increased by 9.49
Mio. €. The result indicates that in the ab-
sence of any co-financing scheme M6 would
receive the highest priority as compared to the
measures M3, M5 and M7.

4. Multi-level co-financing
distortions

It has been shown in the last chapter that
a multi-level co-financing scheme has a
strong impact on the regional budget alloca-
tion. In order to examine the relationship
between the co-financing level and the budget
allocation more closely, a parameterisation
of the EU co-financing level is carried out
comparing the results with the budget alloca-
tions of a respective lump-sum scenario with
the same total budget volume. This compari-
son allows to assess the distortions of the
current multi-level co-financing system. For
this purpose, we parameterise the level of EU
co-financing between 0% and 100%. We
proceed by gradually changing the coeffi-
cients of the regional budget (table 1, row 8)
in steps between 0 and 1 for M5 and VNS
measures. Respectively, the coefficients are
changed between 0 and 0,4 for MSL meas-
ures, corresponding to a co-financing level
from the EU between 0% and 100%. For each
level of EU co-financing a lump-sum scenario
is calculated with an equivalent overall budget. In the
lump-sum scenarios the coefficients of the regional budget
are set to 1.

Figure 4 displays the resulting budgets at every EU co-
financing level and for the respective lump-sum scenario.
The figure shows that there is no difference in the budget
volumes for the measures M2, M4, M8, and M9 between
the co-financing and the lump-sum scenario. M2 receives
the budget volume of the upper bound (6 Mio. €) at any
level of EU co-financing and the respective lump-sum. M4
does not reach the upper bound at lower levels of EU co-
financing and the lump-sum scenario, due to the lower
bound for grassland use of 20,000 ha (compare with the
results of figure 2). Above a 20% EU co-financing level
and the respective lump-sum financial volume, M4 is fully
financed at the upper bound. The reasons for the high prior-
ity of M2 and M4 in both scenarios are the high objective
coefficients.

Despite the lowest objective coefficients, M8 and M9 are
financed at high levels of EU co-financing and the respec-
tive lump-sum scenario. These measures are the only ones
not using any grassland; hence, above about 80% of EU co-
financing and the respective lump-sum volume they receive
the additional financial volume, as the upper bound for
grassland is binding.

301




More intriguing information

1. The name is absent
2. Citizenship
3. Climate Policy under Sustainable Discounted Utilitarianism
4. The name is absent
5. Modelling the health related benefits of environmental policies - a CGE analysis for the eu countries with gem-e3
6. The name is absent
7. The name is absent
8. Estimated Open Economy New Keynesian Phillips Curves for the G7
9. The Social Context as a Determinant of Teacher Motivational Strategies in Physical Education
10. 09-01 "Resources, Rules and International Political Economy: The Politics of Development in the WTO"
11. Who’s afraid of critical race theory in education? a reply to Mike Cole’s ‘The color-line and the class struggle’
12. Regional Intergration and Migration: An Economic Geography Model with Hetergenous Labour Force
13. The name is absent
14. The name is absent
15. Sustainability of economic development and governance patterns in water management - an overview on the reorganisation of public utilities in Campania, Italy, under EU Framework Directive in the field of water policy (2000/60/CE)
16. The name is absent
17. Dynamiques des Entreprises Agroalimentaires (EAA) du Languedoc-Roussillon : évolutions 1998-2003. Programme de recherche PSDR 2001-2006 financé par l'Inra et la Région Languedoc-Roussillon
18. The name is absent
19. Transgression et Contestation Dans Ie conte diderotien. Pierre Hartmann Strasbourg
20. Environmental Regulation, Market Power and Price Discrimination in the Agricultural Chemical Industry