Efficient Supply of Cultural Landscape in a CGE Framework
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It is often assumed that the agricultural
sector produces public goods or positive externalities
that benefit the domestic consumers, in addition to its
production of private goods. Efficient agricultural
support is consequently directed towards resolving
market failures caused by the existence of these public
goods or externalities. We illustrate how this can be
achieved in a Computable General Equilibrium model
for one multifunctional aspect of agricultural
production, namely the production of cultural
landscape. Using a public good modeling framework as
point of departure, we develop supply- and willingness
to pay functions for cultural landscape. Governmental
agricultural support is adjusted to achieve efficient
supply of the public good. As an illustration we apply
our framework using a general equilibrium model for
Norway. We show that efficient supply of cultural
landscape can be achieved even with a tremendous
reduction in initial overall support of agricultural
production.