Land Heterogeneity and the Effectiveness of CAP Set-Aside

The May 1992 reform of the CAP included a choice for farmers between set-aside options. This paper examines the question of whether or not this choice feature has exacerbated the slippage problem associated with the set-aside policy in the context of heterogeneous land quality. A model is developed which provides a basis for determining both a farmer's preferred choice of set-aside option, and the implications of this choice for output reduction. A numerical application of the model suggests a strong tendency for farmers to choose the less effective option in terms of reducing output.