Uncertainty on Agricultural Public Good and Externality Production. Implications for Domestic and International Agricultural Policy Design

The article explores the impact of uncertainties in societal valuation of landscape benefits and environmental costs on policy trade-offs in the agricultural sector. It examines the effects of abolishing commodity subsidies, implementing land subsidies, and introducing input taxes. Through an illustrative model of the German agricultural sector, the study presents numerical results and discusses trade-off curves related to farm income, environmental cost reduction, and landscape benefits. The findings suggest that if policy decisions rely on a simple aggregation of indicators, the robustness of optimal policy options remains relatively stable despite valuation errors.