mid 1980s has been regarded as one of the main issues in empirical modelling (Charemza and
Deadman, 1997). As is well known now, the statistical properties of regression analysis using non-
stationary time series are dubious: if series are non-stationary one is likely to finish up with a model
showing promising diagnostic test statistics even when there is no sense in the regression analysis.
This paper provides an analysis similar to that of Bouchet et al (1989), focusing on the
Netherlands, which takes into account the non-stationarity issue and tries to use an adjusted estimation
procedure. Our results indicate that in general data series like those used by Bouchet et al are non-
stationary. However, it appears that even when accounting for non-stationarity, the final results
obtained by Bouchet et al for France remain valid, at least when seen from a Dutch perspective.
The aim of this paper is to analyze the long-term evolution of Dutch agriculture. The basic
question to be answered is what caused the output growth. Is it coming from a combination of high
price support and high price sensitivity of agricultural supply? Or are Bouchet et al right when they
argue that price support has hardly influenced output growth and is therefore hardly ‘distortionary’? If
price support is not distortionary in a direct way, is it then not still ‘distortionary’ in an indirect way?
And how significant is this indirect impact on agricultural output? Finally, what conclusions can be
drawn from analyzing the long-term evolution of Dutch agriculture for the current policy debate, in
particular with respect to the issue of decoupling of support?
The remainder of the paper is organized as follows: Section 2 provides a brief description of
the main developments in Dutch agriculture since the 1950s. The model specification is presented in
Section 3. Section 4 gives a revised model, corrected for the non-stationarity found in the data and the
cointegration problems occurring when estimating the model in levels. Section 5 provides a detailed
discussion of the estimation results. Section 6 closes with the main conclusions and suggestions for
further research.
Long term development of Dutch agriculture
The Dutch agricultural sector (including horticulture) has been experiencing a tremendous
development since the World War II. As Table 1 shows, since the 1950s gross output has increased
with a factor 4.4, whereas the input of labor and land declined with 36 and 16 percent respectively. In
general output growth was strongest in those sectors where production was not or only loosely tied to
land (pigs, poultry). The input of capital and purchased inputs (e.g. energy, fertilizer, animal feed
produced elsewhere, services) increased with a factor of 2.4 and 5.0 respectively. Since the mid-1980s
the amount of purchased inputs more or less stabilizes (decoupling).
Over the period 1950-2000 the number of farms has decreased with 218 thousand, or about 70%.
At the same time gross output per farm increased with a factor 14.4, whereas the volume of capital
input (excluding the value of land) and land used per farm increased with a factor of 8.0 and 2.6
respectively. As is reflected by output per hectare and the use of purchased inputs per hectare,
agricultural production greatly intensified. Because the output growth exceeded domestic demand
growth, the reliance on exports of Dutch agriculture increased over time. At his moment about 75% of
the value added of the sector depends on exports, whereas 30 years ago this was less than 60% (Van
Bruchem, 2001).
In the following the focus is on arable and animal (meat and dairy) production (excluding
horticulture). The growth of livestock production has been much higher than arable production.
Whereas land-based outputs (arable crops and dairy production) roughly tripled in the period 1950-96,
production of the livestock sector in 1996 was nearly six times as large as in 1950. Since the late
1980s all outputs are stabilizing. In the dairy sector, where a quota system was introduced in 1984
output has actually declined during the last considered decade. Although the livestock sector (meat) is
subject to a relatively light CAP support regime, it has shown a tremendous growth. The shares of
arable, meat and milk in the total gross agricultural output value in 1995 are respectively 14, 63 and 23
percent, which underscores that Dutch agriculture is particularly strong in animal production (total
output value share 86 percent).