‘Nice work if you can get it’: An analysis of optimal set?aside

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Abstract
This paper presents a model of the optimal set‐aside decision of a risk averse producer which takes account of the trade‐off between the certain return to set‐aside land and the higher (in expectation) but more uncertain return to cropping. The model is applied to the case of European wheat production. The ratio of set‐aside premium to expected net revenue per hectare required for producers to find it optimal to set‐aside the qualifying proportion of land is shown to be both very close to unity and relatively insensitive to changes in key parameter values. By contrast, once attractive set‐aside premiums have been established, it is shown that the optimal set‐aside proportion of land is relatively sensitive to these values.

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