Klaus Mittenzwei

Research Scientist

(+47) 941 43 954
klaus.mittenzwei@nibio.no

Place
Oslo

Visiting address
Storgata 2-4-6, 0155 Oslo

Abstract

Seeking the answer to the question of how farmers allocate their limited labor resources has a long tradition in the agricultural economics literature (Schultz 1990, Benjamin 1992). The role of off-farm income to close the income gap between farm households and non-farm households has been emphasized by various scholars (e.g. Schmitt 1989, Gardner 1992, Mishra et al. 2002). Ahearn et al. (2006) focus on the role of government subsidies on the allocation decision. This chapter contributes to this literature. In particular, we investigate the relationship of farmers’ decisions to combine farm income with off-farm wage income and to what extent this affects their total household income. To this end, we combine taxpayer information and agricultural data at the farm household level to study labor decisions and the income of Norwegian farm households and compare with the income situation of all households. Using data of almost 40 000 farm households for the year 2009, we find that farm households obtain an income that is on average larger than that of all Norwegian households. However, there is a large variation. Descriptive statistical analysis looking at joint distributions of key structural variables, policy support and income at farm level provides unique information.

Abstract

Farmers are exposed to climate change and uncertainty about how that change will develop. As farm incomes, in Norway and elsewhere, greatly depend on government subsidies, the risk of a policy change constitutes an additional uncertainty source. Hence, climate and policy uncertainty could substantially impact agricultural production and farm income. However, these sources of uncertainty have, so far, rarely been combined in food production analyses. The aim of this study was to determine the effects of a combination of policy and climate uncertainty on agricultural production, land use, and social welfare in Norway. Output yield distributions of spring wheat and timothy, a major forage grass, from simulations with the weatherdriven crop models, CSM-CERES-Wheat and, LINGRA, were processed in the a stochastic version Jordmod, a price-endogenous spatial economic sector model of the Norwegian agriculture. To account for potential effects of climate uncertainty within a given future greenhouse gas emission scenario on farm profitability, effects on conditions that represented the projected climate for 2050 under the emission scenario A1B from the 4th assessment report of the Intergovernmental Panel on Climate Change and four Global Climate Models (GCM) was investigated. The uncertainty about the level of payment rates at the time farmers make their management decisions was handled by varying the distribution of payment rates applied in the Jordmod model. These changes were based on the change in the overall level of agricultural support in the past. Three uncertainty scenarios were developed and tested: one with climate change uncertainty, another with payment rate uncertainty, and a third where both types of uncertainty were combined. The three scenarios were compared with results from a deterministic scenario where crop yields and payment rates were constant. Climate change resulted in on average 9% lower cereal production, unchanged grass production and more volatile crop yield as well as 4% higher farm incomes on average compared to the deterministic scenario. The scenario with a combination of climate change and policy uncertainty increased the mean farm income more than a scenario with only one source of uncertainty. On the other hand, land use and farm labour were negatively affected under these conditions compared to the deterministic case. Highlighting the potential influence of climate change and policy uncertainty on the performance of the farm sector our results underline the potential error in neglecting either of these two uncertainties in studies of agricultural production, land use and welfare.

Abstract

There is a scientific consensus that the future climate change will affect grass and crop dry matter (DM) yields. Such yield changes may entail alterations to farm management practices to fulfill the feed requirements and reduce the farm greenhouse gas (GHG) emissions from dairy farms. While a large number of studies have focused on the impacts of projected climate change on a single farm output (e.g. GHG emissions or economic performance), several attempts have been made to combine bio-economic systems models with GHG accounting frameworks. In this study, we aimed to determine the physical impacts of future climate scenarios on grass and wheat DM yields, and demonstrate the effects such changes in future feed supply may have on farm GHG emissions and decision-making processes. For this purpose, we combined four models: BASGRA and CSM-CERESWheat models for simulating forage grass DM and wheat DM grain yields respectively; HolosNor for estimating the farm GHG emissions; and JORDMOD for calculating the impacts of changes in the climate and management on land use and farm economics. Four locations, with varying climate and soil conditions were included in the study: south-east Norway, south-west Norway, central Norway and northern Norway. Simulations were carried out for baseline (1961–1990) and future (2046–2065) climate conditions (projections based on two global climate models and the Special Report on Emissions Scenarios (SRES) A1B GHG emission scenario), and for production conditions with and without a milk quota. The GHG emissions intensities (kilogram carbon dioxide equivalent: kgCO2e emissions per kg fat and protein corrected milk: FPCM) varied between 0.8 kg and 1.23 kg CO2e (kg FPCM)−1 , with the lowest and highest emissions found in central Norway and south-east Norway, respectively. Emission intensities were generally lower under future compared to baseline conditions due mainly to higher future milk yields and to some extent to higher crop yields. The median seasonal aboveground timothy grass yield varied between 11,000 kg and 16,000 kg DM ha−1 and was higher in all projected future climate conditions than in the baseline. The spring wheat grain DM yields simulated for the same weather conditions within each climate projection varied between 2200 kg and 6800 kg DM ha−1 . Similarly, the farm profitability as expressed by total national land rents varied between 1900 million Norwegian krone (NOK) for median yields under baseline climate conditions up to 3900 million NOK for median yield under future projected climate conditions.

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Abstract

Purpose Outside farming, pluriactivity is generally considered as undesirable, whereas agricultural economists tend to recommend part-time farming. This contradiction is to be solved. The paper aims to discuss this issue. Design/methodology/approach Linking tax-payer and statistical farm-level data from Norway, the authors tested how profitable part-time farming is for Norwegian farm households. Findings The analysis showed that concentrating on either working on-farm or off-farm generates a higher household income than combining the two. Practical implications Part-time farming may be a lifestyle decision, but apparently is not economically optimal for most farms. Originality/value The contribution solves an apparent contradiction between the discourses inside and outside agriculture.

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Abstract

We develop a general framework in which public goods are conflicting (complementary) if an increase in the provision of one public good raises (lowers) the marginal cost of providing another public good. The framework is used to analyse the policy implications of maintaining safe minimum standards (SMSs) for two public goods. The comparative-static results are illustrated using a sector model for Norwegian agriculture in which the SMSs for food security, agrobiodiversity and greenhouse gas emissions are modelled as constraints. The simulations show that even if public goods are conflicting, better-targeted policies can achieve SMSs at lower social costs.

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Abstract

This study analyzes TTIP, its implications for Norway and Norway’s trade policy choices. TTIP will hardly be concluded under Obama's presidency, but the agreement could become a reality within a few years. TTIP aims at comprehensive cooperation in the regulatory area. In the short term there will be limited harmonization of standards but regulatory cooperation between different systems. In the long term, the goal is stronger cooperation in the regulatory area. TTIP will from what we know not lead to a lowering of European health regulations or a "race to the bottom". If TTIP is realized and Norway remains outside, the EEA Agreement will be little affected and the overall economic impact is moderate. If Norway joins TTIP, there will be a significant real income gain, with estimates ranging from 2236 to 6772 NOK per capita in the various scenarios. There is considerable variation across sectors. With Norway outside TTIP there will be a moderate negative impact for a majority of the sectors, especially some manufacturing sectors that face tougher competition in the EU and USA export markets. The oil industry will benefit from increased demand and higher prices. If Norway joins TTIP, a clear majority of industries will benefit; especially business services and a number of other service industries. The public sector gains from TTIP, mainly due to cheaper inputs. TTIP will contribute to the dismantling of import protection for Norwegian agriculture and without compensating measures, production and employment will be reduced. TTIP will still allow some import protection and this margin of maneuver, which depends on future negotiations, is important for the outcome. With a larger margin of manoeuvre and unchanged budgetarty support, most of Norway’s agriculture can be maintained. With less margin of manoeuvre, it will be more challenging. Norwegian accession to TTIP may occur in the form of a standard trade agreement in which Norway or EFTA are formally equal to the EU and the United States. Alternatively, Norway may participate in a European pillar as in today's "Open Skies" agreement on air traffic. If TTIP succeeds in establishing comprehensive regulatory cooperation, the latter solution is most likely. Such a solution implies that Norway will become more closely integrated with the European Union also in trade policy towards third countries. Norwegian entry into TTIP implies that we have to accept the established rules and negotiate bilaterally with the EU and the USA on market access. The negotiations with the USA will apply to all aspects of market access, while negotiations with the EU will apply only to areas in which the EEA agreement is not already deeper. The negotiations with the EU for TTIP entry will thus include, among other issues, tariffs for seafood and agriculture. As an alternative to membership in TTIP, Norway or EFTA may initiate a trade agreement with the USA. Such an agreement would likely be less extensive in the regulatory area. Such an agreement will also provide an economic gain for Norway, but less than accession to TTIP. For Norway as a whole, accession to TTIP creates a real income gain between 12.5 and 35 billion NOK according to various scenarios, while a free trade agreement with the United States results in a gain of about 7.4 billion NOK. TTIP also includes negotiations on so-called Investor-State Dispute Settlement (ISDS), whereby foreign-owned companies can sue a state if they are unfairly or inappropriately treated. Such rights also exist in national law but international tribunals have to some extent extended the interpretation of what is considered unfair. The European Union has proposed a solution in TTIP with a permanent court as well as rules that discipline the interpretation of the principles, and thus avoids that ISDS unduly interferes into the states’ "right to regulate". This and many other issues are analysed in this report and six background papers.

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Abstract

The aim of the paper is to explore what roll policy plays for farmer’s exit/survival decision. We aim in particular to explore the importance of the total farm income as well as the on-farm wage rate for farm exit. Both the total income well as the on-farm wage rate is heavily influenced by agricultural support. A common believe which is often brought forward by the farmers lobby is that an increase in agricultural support can decrease farm exit rates. We aim to analyse this claim empirically by using data of all farms for the period 1999 to 2009. Our findings show that the absolute size of farms is most important in explaining farm exits. Larger farms have a substantially lower probability to exit than smaller farms. The on-farm wage rate or changes in it are less relevant. Farms seem to need a given size in order to generate a sufficient income for the farmer. In the long run, policy can influence farm size and a farm’s income potential. Our results therefore support in some way the common believe that an increase in support decreases the number of farm exiting. However, we see two problems that need to be considered in this respect. First our findings indicate that the changes is support needs to be rather drastic in order to meaningfully reduce farm exist. We calculate for the period 1999 to 2009 that total support would have need to be approximated 47% (or around 5 billion nkr) higher in order to reduce the yearly exit rate by around 1 percentage point. It is a question if society is willing to pay huge increase in agricultural spending if the effects on farm structural change are rather moderate. In addition we see a more fundamental problem. If support is increase drastically it is likely that the increased income opportunities in agriculture are mirrored by increases in land values. If farmers can earn more in agriculture there might be willing to pay more for agricultural land, if land is scarce this will lead in the long run to an increase in land values. This in turn increases the attractiveness for giving up the farm and renting out or selling the land. Therefore, exits rates might even be less affected by changes in direct payments as our calculations indicate. There is much we do not yet understand. Farms close down despite of favourable income expectations or relatively large farm sizes. Farmers do not seem to make their decisions out of pure economic considerations. Personal preferences for farming as a lifestyle, family ties, local infrastructure, networks, and employment opportunities may add to the explanation of structural change. But our findings suggest that a continuation of the current policy or even a rather strong increase in support is not likely to fundamentally change the current pattern of structural change in Norwegian agriculture.

Abstract

The Norwegian Direct Payment Register (PTR) is a database covering all units that claim direct payments on the basis of eligible animals and acreage. As almost all farms apply for payments and as almost all animal and crop production activities are eligible for various kinds of direct payments, the database represents an unique tool to analyse farm structural change. This paper contains a detailed description of the database and presents some possible venues to conduct such research.

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Abstract

Both the OECD and the WTO have accumulated systematic data on the magnitude of support going to farmers as a result of farm policies. The datasets are collected for different purposes but both give a detailed picture of the evolution of these policies. This paper extends recent work on the compatibility or otherwise of these two attempts at policy monitoring by considering the categorization of individual policy instruments in Norway, Switzerland, the US and the EU. The results show how the OECD data set, particularly with respect to the link between direct payments and production requirements, complements that of the WTO. Many payments classified as in the WTO Green Box require production, raising the possibility that they may not be trade‐neutral. Though the issue of correct notifications to the WTO is the province of lawyers the implications for modeling and policy analysis is more interesting to economists. And the broader question of improving the consistency of the two datasets is of importance in the quest for transparency.

Abstract

Protected Landscapes (PLs) are increasingly used in Norway to conserve cultural (human modified) landscapes. In many cases the maintenance of agricultural activities in PLs is required to preserve landscape character. Whilst research exists on land conservation policies in general, the particular effects of PL on management and adjustment of the farms involved have not received attention in the literature. We present results from a questionnaire sent to owners of agricultural land within PLs in Norway. Whilst landowners were divided upon the effects of PLs on farm management, the economic situation of the farm was little affected. Furthermore, changes in farm management after the establishment of a PL did not seem to have been driven by the establishment of the PLs per se. Most importantly, farm management changes were related to potential options to develop the farm and its land. A statistical model showed that PL-farms did not differ significantly from farms outside PL in the development of their land use or animal husbandry. Our findings thus indicate that the establishment of PL played a minor role as a driving force of changes in farm management and farm income.

Abstract

Protected Landscapes (PLs) are increasingly used in Norway to conserve cultural (human modified) landscapes. In many cases the maintenance of agricultural activities in PLs is required to preserve landscape character. Whilst research exists on land conservation policies in general, the particular effects of PL on management and adjustment of the farms involved have not received attention in the literature. We present results from a questionnaire sent to owners of agricultural land within PLs in Norway. Whilst landowners were divided upon the effects of PLs on farm management, the economic situation of the farm was little affected. Furthermore, changes in farm management after the establishment of a PL did not seem to have been driven by the establishment of the PLs per se. Most importantly, farm management changes were related to potential options to develop the farm and its land. A statistical model showed that PL-farms did not differ significantly from farms outside PL in the development of their land use or animal husbandry. Our findings thus indicate that the establishment of PL played a minor role as a driving force of changes in farm management and farm income.

Abstract

Achieving multifunctionality on a parcel of land, or in a landscape as a whole, requires a delicate balance between the different functions. This is particularly so when one of the desired functions is agricultural production. This paper examines the special challenges involved when cultural landscapes are protected by law. Norwegian `Landscape Protection Areas` are intended to preserve the landscape character of special landscapes. Ideally these landscapes should preserve ecological functions, whilst at the same time allowing for recreation and tourism, and the economic returns to ensure continued use of the landscape in the future. Balancing these functions is fraught with difficulties. The former agricultural systems that shaped these cultural landscapes may no longer be viable from the perspective of food production, and biodiversity is notoriously bad at paying for itself. Are the farmers that own the land willing to take on new roles as landscape managers rather than food producers? And who will pay for this? We present results of a questionnaire to farmers that own or manage farmland in Landscape Protection Areas. Of the 893 respondents, almost a quarter claimed that their farm business had been negatively affected by landscape protection. Niche products or alternative income possibilities had not been realised. We found a generally negative attitude towards municipal authorities and 24 % of respondents were strongly against the establishment of new Landscape Protection Areas, even if the State paid compensation for their economic loss. Based on results of the study we suggest that major improvements to the protection system could be made simply by improving communication between management authorities and farmers and involving farmers in making management plans.

Abstract

In recent years the objectives of agricultural policy have shifted from a principal focus on production and income towards agriculture\"s provision of public goods summarized by the term ‘multifunctionality\". Agricultural sector models, which are important tools for policy advice, need to be adjusted in order to maintain their relevance and reliability in accordance with policy changes. This paper investigates the strengths and limitations of incorporating multifunctionality indicators in the agricultural sector model Common Agricultural Policy Regional Impact Analysis (CAPRI) by reviewing the existing literature and incorporating such indicators in the model. Multifunctionality indicators are developed and implemented for four selected aspects of multifunctionality: food security, landscape, environmental concerns and rural viability. By running different policy reform scenarios, it is shown that indicators closely related to the underlying economic variables of the sector model may provide useful to describe the effects of policy reforms on agriculture\"s multifunctionality. However, these indicators do not completely cover the selected aspects of multifunctionality. In order to yield a broader coverage, this paper proposes to strengthen interdisciplinary research by linking agricultural sector models with other model systems like farm-based economical-ecological models, regional economic models or landscape information systems.

Abstract

The paper analyses and discusses possible impacts on Norwegian agriculture of an EU membership based on the regionalized agricultural sector model CAPRI. Norwegian agriculture is characterized by a small-scale farming structure and high levels of support. Previous analyses have shown that Norwegian agriculture is expected to undergo dramatic changes because of EU membership in terms of farm income, production and structural change. Our study indicates that a substantial share of the agricultural production can be maintained at the national level. Milk and crop production may remain largely unaffected, while meat production decreases in the range of 10–20% compared to a reference run without membership. However, a reduction in total farm income by about 40% indicates that structural adjustments will follow EU accession. The results are discussed in view of the pattern of adjustments observed in Finland and Austria after EU accession in 1995. The need for the dairy industry to take advantage of the improved market access is stressed. Attention is also called to some strengths and limitations of the CAPRI model to analyse large-scale policy changes and to identify model improvements as an area of future research.

Abstract

The level of support to Norwegian agriculture is partly justified with reference to agriculture’s multifunctionality. The concept of multifunctionality involves the provision of so-called “public goods» by agriculture, in addition to the production of food and fibre. Examples of these public goods include cultural landscape, biodiversity, ecological functions, cultural heritage, the viability of rural areas, and food security. The overall aim of the research project “Operationalization of multifunctionality using the CAPRI modeling system» is to study the effects of policy instruments on agriculture’s multifunctionality by defining quantitative indicators for selected elements of agriculture’s multifunctionality that can be implemented in the agricultural sector model CAPRI. This working paper takes a first step towards the appropriate regionalization when multifunctionality is concerned. The current regionalization of the CAPRI model is at the county level. This approach fails when multifunctionality is concerned, because many issues of multifunctionaliy (e.g., cultural landscape aspects) are independent of administrative borders at that level. As the aim of the overall project is to study the effects of policy instruments on agriculture’s multifunctionality, it is important to design regions within the CAPRI model that to a greater extent exhibit similar characteristics with respect to aspects of agriculture’s multifunctionality. Accordingly, it is reasonable to assume that policy changes will have quite similar effects on the multifunctionality indicators within each of these CAPRI regions. This task has been addressed by performing a cluster analysis by which Norwegian municipalities have been grouped with respect to their performance on variables that are expected to describe different aspects of the multifunctionality of agriculture. This information will then later on be used to regionalize the CAPRI model accordingly. […]

Abstract

The growing concern about sub-national domestic support to agriculture is caused by the increased international monitoring of agricultural policies (through the WTO and the OECD) combined with the resulting problems of broadening the scope of agricultural policies to include rural development concerns. In this study, the term «sub-national» is defined as including any level of governance below a country’s (or a group of countries’) top level of governance. Australia, the EU, and the United States are selected as case studies in an attempt to describe and compare the evidence, significance, and reporting procedures of sub-national domestic support. These countries are major actors in world agricultural markets, possess considerable political power to influence international negotiation outcomes, and are able to set standards in the way sub-national domestic support is reported. The study shows that sub-national domestic support is evident in all countries investigated, but its significance varies considerably. Measured as a percentage of total domestic support, sub-national domestic support accounted for 5% and 15% in the US and the EU, respectively, while it reached 50% in Australia. The main reasons for the differences can be found in the historical development of the countries’ governance structure in general and the evolution of the countries’ agricultural policies in particular. […]

Abstract

This report looks at the special measures for agriculture within the field of taxation and social security. Chapter 1 and 2 deal with general overview of taxes and taxation principles. Chapter 3 give more detailed information of the tax system in the selected countries, US, Canada, Australia, Germany, UK, France, Ireland, Italy and Switzerland. Chapter four deals with notifications to the Committee on Agriculture in the World Trade Organisation (WTO) concerning tax measures. In chapter 5 we have tried to systematize the different tax schemes in the selected countries.

Abstract

This paper discusses arguments to justify active income redistribution by governments based on the assumption that the redistribution of income is the only government objective. Other (legal) governmental objectives like providing public goods or correcting for externalities are neglected. There exist sound economic arguments to justify active income redistribution by governments (e.g. risk averse behavior, preferences for equality, and concerns for the poor). These arguments, however, do not seem to confirm that policies aimed to redistribute income only should be eligible for special interest groups. The choice of policy instruments should be based on the concept of transfer efficiency. This concept ranks policy instruments according to their costs of transferring a given amount of income between individuals in the economy. Economic theory is biased in the understanding of the role government plays in the decision making process. Neo-classical theory holds the view that governments act as if they represented the aggregated preferences of the individuals in the economy. Public choice theory assumes instead that governments are made up by individuals who pursue their own interests (but do not necessarily act egoistically). According to this theory, governments can be induced to implement policies that redistribute income as a result of lobbying and rent-seeking behavior. Norway is characterized by a relatively equal distribution of income compared to other countries. The more or less equal distribution of total household income of Norwegian farmers is to a greater extent a result of part-time farming than a result of domestic agricultural policies that aim to equalize (agricultural) income among farmers. This picture may change considerably when agricultural income per man-year is concerned but further research is needed to answer this question.