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© 1986 Oxford University Press and the Foundation for the European Review of Agricultural Economics

research-article

Budget costs of the EC's agricultural price policy under uncertainty

DIETER KIRSCHKE*

EC Commission, GD Development Brussels, Belgium

Received November 1, 1984; Revision received April 1, 1985.

Summary

Budget costs under the EC’s agricultural price policy are subject to several determinants which cannot be predicted with certainty. In the empirical part of the paper, the considerable extent of budget costs uncertainty is revealed. Basically, budget costs uncertainty exists because domestic and world market supply and demand are stochastic. The consequences of this kind of uncertainty are analysed in the theoretical part of the paper. Expected budget costs are shown to be often higher than their hypothetical certainty values. Moreover, several factors are found which enhance budget costs variance in the present surplus situation on EC agricultural markets. This demonstrates the limited value of deterministic analysis for actual EC budget costs planning under uncertainty.


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