policies under the Green box, i.e. are supposed to ‘have no, or at least minimal trade distorting
effects or effects on production’ (Annex 2 of the Agreement of Agriculture, signed in
Marrakech). Many agri-environmental programs attempt to decrease output and increase
environmental quality by banning or restricting the use of specific inputs (e.g. easily soluble
commercial fertilizers or growth regulators) while at the same time compensating participants
by direct payments. While restrictions on inputs clearly have a negative effect on production,
direct payments if not fully decoupled (e.g. farmers may spent at least part of the direct
payments the get for restricting specific inputs to buy more of not restricted inputs) may have
a positive impact, leaving the overall effect of the program an open empirical question.
The aim of the study in hand is to empirically measure the success of agri-
environmental programs in regard to the objective of reducing or stabilizing production levels.
In particular, we investigate the impact of ten agri-environmental programmes in Austria, the
EU country where agri-environmental programs played the most important role (e.g. about
75% of agricultural land participated at least in one agri-environmental measure; around 17%
of total EU agri-environmental budget is transferred to Austrian farmers), on grain yields,
utilizing farm accounting data and Monte Carlo simulation procedures.
The reminder of this study is organized as follows: The next section describes the agri-
environmental program analyzed. Section 3 discusses estimation procedures. Section 4
presents estimation results. Section 4 discusses the results.
2. Austrian Agri-environmental program
The Austrian agri-environmental programme OEPUL (Austrian programme for the promotion
of extensive farming methods compatible with requirements of environmental protection and
the maintenance of the countryside) was introduced in 1995, the year after EU-accession
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