Site-specific and regionally optimal direct payments for mountain agriculture

Direct payments linked to land use play a key role for Swiss mountain agriculture. A theoretical investigation of the welfare effects of direct payments is presented. A regionalised linear programming model is described for the agricultural sector of the Swiss Canton of Grisons. A new optimal set of site-specific and regionally specified direct payments is developed. Under the assumptions presented in the model, approximately one quarter of the actual direct payments could be saved with the optimised system compared to the projection solution with site-specific direct payments at the same level as under the current situation and undifferentiated between regions. The current system of direct payments should be replaced by regionally specified direct payments that rise with increasing altitude and differentiate between less productive and more productive land.