The future of agriculture. Prospective scenarios and modelling approaches for policy analysis

The objective of this paper is (i) to compare and discuss literature related to global and European outlooks in relation to the farming sector and rural areas and (ii) to provide an overview of policy modelling methodologies, especially but not only those used in assessing the impact of the Common Agricultural Policy (CAP). There is significant variation in terms of both the policies and external drivers that are taken into account in global and European outlooks, driven predominantly by the heterogeneity in focus of studies, the approach applied and/or external pressures. An increasing number of studies take on board the new CAP challenges. However, an area where improvements are needed is in the understanding of the sensitivity of policy effects to assumptions on external drivers. Two key modelling approaches applied for policy impact analysis include structural models and econometric models, with the former dominating the latter mainly due to its better adaptability to the needs of policy makers. However, with the CAP evolving towards ever more complex instruments, the relevance and predictive accuracy of structural models will possibly improve only as long as methodological and data issues are addressed.

► We review literature on the agricultural outlooks and CAP modelling methodologies.
► There is significant variation of policies and external drivers in agricultural outlooks.
► An area where outlooks need improvement is the sensitivity of policy impacts to external drivers.
► Structural models dominate the area of policy impact analysis.
► Their usefulness for analysis of new CAP is conditional on empirical and conceptual advancement.