Farm level effects of EU policy liberalization: Simulations based on an EU-wide agricultural sector model and a supply model of the German agricultural sector

The impact of sectoral or economy wide policy scenarios is often of strong political and public interest, yet it is a scientific challenge. When analyzing different levels of aggregation, the use of single models may not be sufficient. In this paper we establish an interface between the European Simulation Model (ESIM) and the Farm Modelling Information System (FARMIS). The linkage of the two models allows us to quantify adjustment processes both at the sectoral level and at the farm group level for the German agricultural sector. Different liberalization scenarios are presented and compared to a reference scenario. The abolishment of market price support leads to a reduction of farm incomes, especially if direct payments are also reduced. The low absolute level of return to labor, particularly in grazing livestock farms, suggests strong changes in farm structure as well as the farm input industry in Germany under the full liberalization scenario.