Agricultural support as a Pigouvian subsidy for landscape amenity benefits: revisiting European regional convergence Online publication date: Fri, 21-Nov-2014
by Roger Bivand; Rolf Jens Brunstad
International Journal of Foresight and Innovation Policy (IJFIP), Vol. 8, No. 2/3, 2012
Abstract: European regional per capita income levels may be underestimated if the positive external effects of landscape amenity benefits are omitted. This may impact ß-convergence models of regional growth. Agricultural support has been used as a conditioning variable in a number of studies of European regional growth. Without correction for a possible Pigouvian subsidy, we would expect a negative relationship between agricultural support and regional growth. If agricultural support is intended to act as a Pigouvian subsidy aiming at internalising landscape amenity benefit, we would expect to see upward shifts in coefficient values and possibly a sign change. Because landscape amenity benefits cannot be readily measured, we will be obliged to explore the parameter space of models including such a correction, in particular to see whether positive coefficient values for agricultural support can be found for representations of amenity benefit that harmonise with economic theory.
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