Capturing market impacts of farm level policies: a statistical extrapolation approach using biophysical characteristics and farm resources

Technical change at the farm level or changes in input prices often have an impact on the firm's supply function, which in turn affect their economic and environmental performance. These changes can take place in numerous ways. This paper presents a methodology that increases the consistency of supply responses across various sets of agricultural products and most representative farm typologies in Europe, with a market model based on a statistical response function approach. Since most farm simulation models are limited to a subset of regions and farm types, the linkage to an aggregated model requires a procedure for expanding these results to non-sample regions to achieve full regional coverage. This paper addresses theoretical aspects related to the consistency between micro and market level models. The proposed approach is applied using a consistent set of simulation results from farm models in seven European regions. Our results show a fairly stable behaviour of the farm models considered for the analysis and quite good fit of the estimated response surface. As results are still preliminary we critically reflect on the applicability of this method in addressing further needs on up-scaling of other economic as well as environmental indicators.