Policy related transaction costs of direct payments

To date, evaluations of direct payments have, in the main, neglected to consider the costs of enforcement and control. However, the question of the degree to which these policy related transaction costs influence the implementation and efficiency of agricultural policy measures is relevant for the development of agricultural policy. An assessment of policy related transaction costs in the cantons Grisons and Zurich show that these costs amount to roughly CHF 1’100 per farm. Local government pays 36 % (Grisons) and 38 % (Zurich). In relation to overall direct payments, the costs lie between 1,8 % and 2,8 %. Thus, today’s direct payments system is characterised by a relatively high transfer efficiency. By linking direct payments to the multi-functional services provided by agriculture, it is possible to interpret enforcement and control costs as part of the quality control costs for these services. This, in turn, contributes to the credibility of the direct payment system and society’s acceptance of the funds used for this purpose.