Positive Mathematical Programming Approach for Ex-post Evaluation of Set Aside in Italy

The main objective of this paper is to present a positive mathematical programming model for recovering the production specific costs per agricultural activity using the Farm Accountancy Data Network (FADN) database. It is well known that FADN, at European level, does not gather information about the variable costs associated to the different farm activities, but only the total variable costs at farm level. In this respect, it is evident that all the analysis that aims to evaluate the production allocation decisions cannot be carried out without costs derived from external sources (engineering information, literature, etc.), with the risk to not be able to differentiate the costs according to the farm specialization and the farm size. The policy and market evaluations based on FADN are constrained to this important gap, because the farm activity profitability included in the sample is not explicit and it should be estimated. To estimate this important economic component of the farm decision process, the standard PMP calibration method is modified so that it is possible to generate the observed production plan using the dual structure of the problem proposed by Howitt and Paris (1998). The model proposed in this paper allows to recover the dual information linked to each farm production activity and estimate it using an approach based on the Heckelei’s PMP proposal (2002). The first part of the paper presents an extension of the Heckelei calibrating approach applied to the specific cost estimation problem; while, in the second part, the estimation results are submitted to statistical tests to validate the model