How Differently Do Farms Respond to Agri-environmental Policies? A Probabilistic Machine-Learning Approach

This study evaluates the extent to which farmers respond heterogeneously to the agri-environmental policies implemented in the European Common Agricultural Policy (CAP). Our identification and estimation strategy combines a theory-driven research design formalizing all possible sources of heterogeneity with a Bayesian additive regression trees algorithm. Results from a 2015–2018 panel of Italian farms show that the responsiveness to these policies may differ substantially across farms and farm groups. This suggests room for improvement in implementing these policies. We also argue that the specific features of the CAP call for a careful implementation of these empirical techniques.