Redistribution Of Payments Research Articles

A Novel Cost Allocation Mechanism for Local Flexibility in the Power System with Partial Disintermediation

Electricity markets are going through a comprehensive transformation that includes the large-scale appearance of intermittent renewable generators (RGs). To handle the local effects of new RGs on the distribution grid, the more efficient utilization of distributed local flexibility (LF) resources is necessary. However, the optimal market design is not yet known for LF products. This paper investigates a novel cost allocation mechanism in the context of this market challenge. The mechanism is designed to provide several important advantages of peer-to-peer trading without creating barriers to practical application. It provides partial disintermediation. The acquisition of LF remains the responsibility of the DSO, while the financial costs of the transaction are covered on power exchanges (PXs). To provide this functionality, the clearing algorithm of the PX in question has to incorporate a novel feature we call the Payment Redistribution Technique. This technique allows the buyers’ expenses to be larger than the sellers’ income, and the difference is used to finance flexibility costs. Its mathematical formulation is presented and analyzed in detail, considering computational efficiency and accuracy. Afterward, a realistic case study is constructed to demonstrate the operation of the algorithm and its energy market effects.

Farm technical and environmental efficiency and subsidy redistribution in Ireland: A simulation approach of possible performance and equity effects

AbstractWe investigate the relationship between EU Common Agricultural Policy environmental payments, and dairy and beef farm level competitiveness and environmental performance. We use an Irish panel of farm level financial data for the years 2000–2017 and apply stochastic frontier analysis. Our estimates identify a positive relationship between technical efficiency and the Green, Low‐Carbon, Agri‐Environment Scheme for dairy farms, in contrast with the negative relation identified for previous payments of this kind such as the Rural Environment Protection Scheme for both beef and dairy. We then simulate increases in the first type of environmental payments financed through reductions in decoupled payments. We use alternative scenarios for payment redistribution such as flat allocation, allocation to farms with low stocking rates or proportional reallocation of payments. We find that under the second scenario, marginal environmental gains can potentially be achieved for dairy farms. For beef farms, the proportional allocation performs best regarding environmental gains. We also find that under this scenario, the impacts on income inequality can be smoothed for both farm types.

Will Changes in the Common Agricultural Policy Bring a Respectful Approach to Environment in EU Countries?

Abstract Under the 2014–2020 Common Agricultural Policy (CAP), the existence of two pillars is maintained and the link between them is strengthened. Regulation (EU) No. 1307/2013 provides a new system of direct payments. The system consisting of the decoupling of agricultural aid from production (partial decoupling) and the provision of general income support, which came into force in 2003, is being transformed into a system in which single farm payments are replaced by a seven-component system of multi-purpose payments: basic payment per hectare, greening component, additional payment to young farmers, redistributive payment, additional income support in areas with natural handicaps, coupled support, voluntary simplified scheme for small farmers. There are three measures related to greening payments: crop diversification: the farmer must grow at least two different crops; preservation of existing permanent grasslands; the creation of an area of ecological interest corresponding to at least 5% of the arable land of a holding over 15 hectares (excluding permanent grassland and perennial crops). The new CAP aims to increase agriculture‘s contribution to the EU‘s environmental and climate objectives, provide more focused support for smaller farmers and allow Member States greater flexibility to adapt measures to local conditions.

TARGETING THE REDISTRIBUTIVE PAYMENT IN SELECTED NEW EUROPEAN UNION MEMBER STATES

The most important element in the recent reform of the Common Agricultural Policy, which is intended to reduce the concentration of aid distributed under the direct support system, is the so-called redistributive payment. The redistributive effects of this instrument depend on its specific form implemented at the national level, the level of funding, and the area structure of holdings in a given country. The objective of this paper is to compare the targeting of the support distributed under the redistributive payment in the three new Member States of the European Union – Bulgaria, Lithuania and Poland. In order to achieve this objective, it was established which area groups of holdings benefit from (and which lose out on) the application of the redistributive payment in each country. In addition, the average amount of support for a holding per hectare of agricultural area, and the percentage change in this support due to the introduction of the redistributive payment, depending on the size of the holding, in individual countries, are shown as a function. The source material was the data made available by the ministries of agriculture of the countries under analysis, relating to 2018.

Regional differences in the concentration of aid granted under the direct support system for farmers in Poland

The purpose of the study was, apart from measuring and visualising regional differentiation of the degree of concentration of direct support for farmers in Poland, the empirical verification of hypotheses explaining this differentiation. It was found that the level of concentration of direct support at the voivodship level ranges from moderate to strong. Generally, the degree of concentration of support in a given voivodeship is higher: the larger the average farm area is in the voivodship; the smaller part of the agricultural land in the voivodship is covered by the redistributive payment; the smaller the share of sector payments in the total amount of funds absorbed by farmers in this voivodship. This means that the EU-Member States - taking into account when designing instruments of direct support the spatial differentiation of the area structure of farms or their production specialisation - can reduce the concentration of distributed aid.

Assessing the redistributive impact of the 2013 CAP reforms: an EU-wide panel study

AbstractThis paper analyses the effects of the 2013 Common Agricultural Policy reforms on the distribution of direct payments across the European Union (EU) member states. The differential implementation of two key redistributive policies across countries from 2014 onwards enables the use of a generalised difference-in-differences strategy to estimate their distributional effects. Using data on EU-wide direct payment recipients reveals a substantial negative impact on the largest payment recipients and significant redistribution towards smaller farmers. A disaggregated analysis suggests that of the two instruments, capping, though still an attractive option for policymakers, is less effective at redistributing subsidies towards smaller farmers than the Redistributive Payment Scheme.

Identification of the area groups of agricultural holdings benefiting from the redistributive payment scheme: A Polish case study

The aim of this paper was to answer the question of which area groups of Polish agricultural holdings had incurred loss on (and which had benefited from) applying the redistributive payment. Mathematical methods were applied. It was found that in the period between 2015 and 2019, holdings with a size of up to 6 ha and holdings with a size of over 55 ha incurred loss on the introduction of redistributive payment in its current form (some slight differences were identified as regards the threshold holding areas in individual years of the period in question). Thus, holdings with areas between 6 and 55 ha benefited from redistributive payment. The redistributive effects of the instrument are too weak in Poland to consider it a tool for accelerating positive structural transformations in agriculture.

THE CONSEQUENCES OF USING DIFFERENT VARIANTS OF IMPLEMENTATION OF REDISTRIBUTIVE PAYMENT – A CASE STUDY OF POLAND

The article describes a diagnostic study measuring the degree of concentration of the aid which is currently distributed under the direct support system for farmers in Poland; it also presents the regional differentiation in aid concentration. The author conducted a simulation test quantifying the redistributive effects of applying various variants of an instrument equalising the amounts of support granted to farms. This can make the basis for an ex-ante assessment of alternative options of the implementation of redistributive payment. The research enabled the identification of ranges of the areas of farms which benefit from the current shape of redistributive payment and which may benefit from alternative variants given as examples. The final part of the article contains several recommendations on how to design redistributive payment at a national level, depending on the goals to be achieved with this instrument.

Near-Optimal Scheduling in Day-Ahead Markets: Pricing Models and Payment Redistribution Bounds

Near-optimal unit commitment (UC) scheduling is a practical reality in wholesale electricity markets. This paper revisits previous work that has found that minor differences in cost among near-optimal schedules can result in a large redistribution of market payments (i.e., changes in generator profits and consumer surplus). It has been believed that this instability is unavoidable, but previous studies have only calculated prices using what we call the Restricted pricing model. This paper compares previous results to three additional models that are based on integer relaxation, and which we call the Partial, Tight, and Loose Dispatchable pricing models. Results are presented for a suite of test cases, including four ISO-scale cases. Similar to previous findings, the Restricted and Partial Dispatchable models both result in large payment redistributions among alternative solutions. In contrast, theoretical and experimental results for the Tight and Loose Dispatchable models show that pricing models with unconditional integer relaxation will have bounded payment redistributions, and, further, this bound can become quite small by tightening the UC problem's convex relaxation. In the presence of market power, stable financial outcomes may improve market efficiency by reducing incentives to bid strategically.

So Many Hospitals, So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance

As part of the Patient Protection and Affordable Care Act, participating hospitals have part of their Medicare reimbursements withheld and then redistributed based on quality performance. The Hospital Value‐Based Purchasing reimbursement plan relies partly on ordinal rankings of hospitals to determine how money is distributed. We analyze the quality metric score distributions that underlie payment redistribution and show that there is not enough information to reliably differentiate hospitals from one another near the program point cutoffs, and conclude that a large part of the payment formula is driven by sampling variability rather than true quality information. An alternative plan for rewarding hospitals is developed.

Incentive-Compatible Market Clearing for a Two-Stage Integrated Electricity-Gas-Heat Market

The establishment and development of an integrated energy market (IEM) contributes to the equitable distribution of electrical and thermal energy production resources. However, the application of conventional locational marginal price theory generally fails to promote the declaration of truthful marginal costs by market participants in the process of clearing and settlement of the IEM, which detracts from market fairness and may reduce market efficiency. Simultaneously, the continuous expansion in the scale of renewable energy sources (RESs) threatens the safe and stable operation of electrical power systems. Accordingly, the present study seeks to improve the efficiency of the IEM under large-scale RES penetration, and promote the truthful declarations of market participants by applying a Vickrey-Clarke-Groves (VCG) auction scheme to the IEM, and establishes a two-stage IEM model that promotes compatibility between the incentives of market participants to enhance market fairness. The present study also addresses the imbalance between market revenue and expenditure typically produced by the VCG auction scheme by designing an ex-post payment redistribution mechanism to ensure the equitable cost recovery of all market participants. Simulation results demonstrate that the application of the proposed VCG auction system to the IEM ensures maximum efficiency, cost recovery, and incentive compatibility as dominant strategies, and helps to integrate large-scale RES penetration with the IEM.

Optional Payments of the First Pillar Under Cap Vs the Average Amount of Support Per Farm

Summary Subject and purpose of work: The article analyses the influence of optional instruments applied in Poland as part of the first pillar of the Common Agricultural Policy on the average support provided to farms in individual provinces. Materials and methods: The study was based on data from the Agency for Restructuring and Modernisation of Agriculture as well as quantitative and analytical methods, especially simulations and comparative variant analysis. Results: The optional instruments applied in Poland increased the average support provided to farms in central and eastern Poland. The average amount of support paid per farm would have been bigger in northern, western and southern provinces if optional instruments had not been implemented. Primarily, the introduction of both redistributive payment and production-related support (all forms of this support taken together) resulted in a decrease in the average aid per holding in the same group of provinces and at the same time an increase in this size in other provinces (compared to the situation in which the amounts for financing these instruments would be distributed under the single area payment). Conclusions: The analysis of the influence of redistributive payment and coupled support on the average amount of financial aid per farm in individual provinces shows that the consequences of using these instruments were very similar to each other in their effect on the variable under study.

Valuing social sustainability in agriculture: An approach based on social outputs' shadow prices

Interest in sustainability has gained ground among practitioners, academics and policy-makers due to growing stakeholders' awareness of environmental and social concerns. This is particularly true for agriculture. However, relatively little research has been conducted on the quantification of social sustainability and the contribution of social issues to the agricultural production efficiency. This paper proposes a framework based on state-contingent outputs to compute shadow prices of social outputs. Our methodological approach is based on the directional distance function and illustrated using a farm-level dataset from a sample of Catalan arable crop farms in 2015. Our results indicate that in the sample of 180 farms included in the analysis, efficiency scores are relatively high for the three alternative states of the nature considered in our state-contingent analysis. In addition, our findings show that social outputs' shadow prices are positive, indicating that producing more social outputs is considered as great value to the farm. For the efficient farms, the social outputs' shadow prices are contingent upon on the state of nature, in a way that social outputs' shadow prices increase with the improvement in crop growth conditions. These results have implications in terms of EU farm payment redistribution.

Income and spatial distributional effects of a congestion tax: A hypothetical case of Oregon

In US urban areas, traffic congestion remains a growing and costly problem. The Texas Transportation Institute estimated that in 2014 delays due to congestion caused an extra 7 billion extra hours in delay, leading to wasted fuel, increased environmental degradation, and high user costs. Previous studies have focused on the impacts to congestion via highway toll lanes and the income distributional effects of tolling. While tolling can be effective in reducing congestion levels, these tolls have been found to be at least as regressive as fuel taxes. Further, these studies do not investigate the impacts tolling has on rural households compared to urban households. This study presents a per-mile congestion tax as an alternative policy tool to congestion tolling. Using a Suits Index with the Oregon Households Activity Survey, we find a per-mile congestion charge to be progressive on income. This suggests that the administratively challenging toll revenue redistribution payments that would be necessary to make congestion tolling progressive would not be needed. At the same time, however, the Suits Index suggests that a per-mile congestion charge would be regressive with regards to rural households. Econometric models are estimated to further support and explain these outcomes. While rural households, in general, drive more during peak hours compared to urban households, we find that low-income rural households are less likely to drive during these periods than wealthier rural households.

The Impact of the 2013 CAP Reform on the Decoupled Payments’ Capitalisation into Land Values

AbstractWe assess the effects of the 2013 CAP reform on the capitalisation of decoupled payments in land rental values. Our estimates suggest that the reform leads to an increase in the capitalisation of decoupled payments by an additional 18 cents for each Euro of decoupled payments relative to the pre‐reform situation. However, there is an important variation in the reform effects between Member States (MS) particularly between Old Member States (OMS) and New MS (NMS). In NMS, the capitalisation rate slightly reduces from 83% in the pre‐reform period to 79% in the post‐reform period. Although, the rate is significantly lower in OMS, it doubles (from 21% to 43%) due to the reform. The main sources of the post‐reform capitalisation in the European Union (EU) are the pre‐reform capitalisation accounting for 69% of the total post‐reform capitalisation, followed by the entitlement stock change with 19%, by the internal convergence of payments with 18%, the budget change (including external convergence) with 1%, and the differentiation of payments (redistributive payment) with −7%. Overall, our estimates suggest that on average in the EU, the non‐farming landowners’ policy gains are 27% of the total decoupled payments in the post‐reform period compared to 18% in the pre‐reform period.

BANKING UNION IN EUROPE: HOW MUCH CENTRALISATION IS NEEDED?

ABSTRACTWe examine the efficiency of banking regulation in a federation with two tiers of government and highly integrated banking systems. We assume that policy makers have incomplete information about banks’ true health, and banking sector turmoil can generate cross‐border spill‐over effects. We show that, in such an environment, the decentralisation of policy responsibilities for the regulation of banks can achieve the first‐best allocation and ensure financial stability. While national governments design banking regulations, the federal policy maker authorises inter‐regional income redistribution payments throughout the federation. Our results suggest that strengthening national responsibilities in banking regulation and supervision in the course of the further development of the European banking union may be advisable.

The Growth of Local Education Transfers

We argue that previous research studying the relationship between a growing elderly population and local support for public education has overlooked a key component to public education finance: redistribution payments made by older households. A fuller accounting of these payments indicates that a growing elderly population might very well prove to be a boon to local public school students not a burden as has been previously suggested. Beginning with a national sample of suburban school districts, this article shows that a higher elderly to student ratio within a district actually increases per-student revenues, even after accounting for the downward pressure that older households place on tax rates. We then explore a specific channel through which elderly households redistribute resources to school-age children: local property taxes. Focusing on Chicago-area suburban school districts, we show that a rise in a community’s elderly to student ratio actually increases the level of per-student property tax redistribution that occurs.

Economizing justice: Turning equity claims into lower energy tariffs in Chile

This paper considers the issue of how energy justice is economized; how political and ethical claims about particular energy (in)justices are turned into economic valuations. Drawing on science and technology studies, we present a conceptual framework that understands economization as emerging from three interrelated processes: problematization, framing and overflowing. Applying this framework to the drafting of new energy legislation in Chile, we trace how perceived shortcomings in equity and distributional justice were turned into “market failures,” able to be resolved by market-based mechanisms. This case highlights the dangers implicit in the uncritical economization of energy justice claims, in which ethical considerations regarding the distribution of risks and benefits of energy production and provision are reduced to a redistribution of payments among consumers – something that limits the possibilities for structural reform.

Do the CAP subsidies increase employment in Sweden? estimating the effects of government transfers using an exogenous change in the CAP

This study evaluates the impact of agricultural subsidies (CAP) on employment outside the agricultural sector. A side-effect of the decoupling reform in 2005 was that Sweden introduced a grassland support which caused a redistribution of payments among regions. This heterogeneity in transfers is used to identify the effects of government transfers on regional labour markets. The effect on employment is estimated using Swedish municipality data for the years 2001 to 2009. The subsidy creates private jobs at a cost of about $26,000 per job, which is consistent with earlier estimates based on US data.

Implementation of Common Agricultural Policy provisions on direct payments

The concept of "common policy" faithfully reflects one of the defining features of the Common Agricultural Policy. Currently, CAP is built around two pillars: Pillar I- Agriculture and Pillar II- Rural Development. The main way to support agriculture is represented by direct payments. The Regulation (EU) 1307/2013 establishing rules for direct payments to farmers during the programming period 2014-2020 provides uniform payment schemes applicable in all Member States. Some of these schemes are compulsory (such as basic payment scheme or single payment area; payment scheme for farmers using agricultural practices beneficial for the climate and environment), others are optional, leaving it to countries if they want to apply these schemes or not. The proposals for payment schemes applicable in Romania during the period 2015-2020 are: Single Area Payment Scheme (SAPS); Payments for Agricultural Practices Beneficial for the Climate and the Environment; Redistributive Payment; Payments for Young Farmers; Transitional National Aids and Simplified Scheme for Small Farmers.