The benefits to the Netherlands of certain internal investment subsidies in light of common market policies

by Velma Montoya Thompson

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As Dutch policymakers consider alternative agricultural investment strategies, they confront special economic incentives to the Netherlands arising from membership in the European Economic Community (EEC). In particular, they confront the EEC agricultural pricing policies, and the EEC subsidy for agricultural modernization which Member States may selectively accept. In this context, this paper asks whether the Netherlands would benefit from Dutch government subsidies to farmers' investments in more mechanized equipment. The paper finds, within the context of the EEC agricultural pricing policies, that the Dutch people cannot be expected to gain from more than the amount of investment freely chosen by Dutch producers. Under the additional complication of the EEC subsidy, the Netherlands gains from the EEC subsidy only for agricultural products with highly elastic export demands; otherwise, it does not. Available evidence indicates that Dutch policy towards agricultural investments corresponds to these findings.

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