Economics at your fingertips  

Technical change and the Common Agricultural Policy

Amr Khafagy and Mauro Vigani

Food Policy, 2022, vol. 109, issue C

Abstract: This paper adopts an alternative method for the analysis of the CAP’s impact on farms’ productivity based on a system of equations derived from a non-nested three-factors CES production function. With this method, we estimate the elasticity of substitution between labour, capital, and land in the EU agricultural sector, the magnitude and direction of technical change, and the impact of the CAP subsidies. The system of equations is estimated using the GMM estimator on a farm-level panel dataset covering 117,179 farms from all EU MS for the period from 2004 to 2015. Our results suggest that land, labour, and capital in EU farms are complementary production factors characterised by a slow decline or stagnation in the land-, labour-, and capital-augmented technical change. Higher levels of Pillar I and Pillar II CAP payments as percentage of total agricultural income have negative or no impact on farms’ technical change, but higher nominal amounts of Pillar I decoupled subsidies, Pillar II investment and LFA subsidies have a positive impact. Moreover, the larger the share of subsidies in total agricultural income the stronger is the negative impact of the CAP on agricultural technical change.

Keywords: Common Agricultural Policy; Factor-augmenting technical change; CES production function; GMM estimator (search for similar items in EconPapers)
JEL-codes: O33 Q12 Q18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.foodpol.2022.102267

Access Statistics for this article

Food Policy is currently edited by J. Kydd

More articles in Food Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-06-15
Handle: RePEc:eee:jfpoli:v:109:y:2022:i:c:s0306919222000483