Agricultural support as a Pigouvian subsidy for landscape amenity benefits: revisiting European regional convergence

摘要

European regional per capita income levels may be underestimated if the positive external effects of landscape amenity benefits are omitted. This may impact β-convergence models of regional growth. Agricultural support has been used as a conditioning variable in a number of studies of European regional growth. Without correction for a possible Pigouvian subsidy, we would expect a negative relationship between agricultural support and regional growth. If agricultural support is intended to act as a Pigouvian subsidy aiming at internalising landscape amenity benefit, we would expect to see upward shifts in coefficient values and possibly a sign change. Because landscape amenity benefits cannot be readily measured, we will be obliged to explore the parameter space of models including such a correction, in particular to see whether positive coefficient values for agricultural support can be found for representations of amenity benefit that harmonise with economic theory.