Agricultural policy regime change assessment: Austrian accession to the European union

Policy regime change evaluation involves assessing what would have been had the policy not changed. In this paper, we empirically assess the impact on Austrian pig producers of the 1995 decision of Austria to join the European Union. Applying a recently developed Hausman-Wu-Type cointegration test, we confirm the existence of a cointegrating relationship between Austrian and EU pig prices series. This relationship is used to forecast the counterfactual time path of prices. Within an expected utility framework, we compute the Austrian producer's willingness to pay to remain under the pre-accession policy. Accounting for the dual income and insurance effects, we found producers to have been under-compensated. Conventional welfare measures which do not include the insurance component would significantly underestimate the total welfare impact.