How could digitalisation make agricultural policy more effective in reducing undesired impacts and enhancing the benefits of farming?

Ehlers et al. (2020) investigated the extent to which digital technologies can trigger different choices of agricultural policy instruments and novel design specifications that address problems of sustainability in farming more effectively and possibly more efficiently. They developed and applied an analytical framework that focuses on the effects of digitalisation in distinct policy dimensions, drawing on theoretical insights and examples from practice in a European context.

Most importantly, new digital data and technologies expand opportunities to improve estimation of input-outcome correlations, achieve location-specificity and support intertemporal flexibility in the implementation of agricultural policy instruments. This increases the precision and therefore the effectiveness of agricultural policy: Outcome-oriented instrument designs can be used that are spatially targeted and reflect intertemporal dynamics. They are complemented with new design options along the other policy dimensions:

• The locus of discretion can shift to farms to increase the efficiency of instruments.

• Costs distribution between farms and public budgets can be aligned better to increase efficiency and acceptance of instruments by farms and the public.

• Prices can replace quantity requirements to a greater extent to improve allocative efficiency among farms and among traders.

• Degrees of participation in policy instruments can reflect cold and hot spots of farming externalities and opportunities to collaborate up to landscape levels.

• Data domains can move into public domains to increase transparency of farm activities and food supply.

• Information governance can complement instruments and extend design options through information release, advice and nudging. 

Ehlers, M.-H., Huber, R., Finger, R. (2021). Agricultural policy in the era of digitalisation. Food Policy: https://doi.org/10.1016/j.foodpol.2020.102019

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