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In a Search for Equity: Do Direct Payments under the Common Agricultural Policy Induce Convergence in the European Union?

Artiom Volkov (), Tomas Baležentis (), Mangirdas Morkūnas and Dalia Streimikiene ()
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Artiom Volkov: Division of Farms and Enterprises Economics, Lithuanian Institute of Agrarian Economics, Kudirkos 18–2, LT-03105 Vilnius, Lithuania
Dalia Streimikiene: Division of Farms and Enterprises Economics, Lithuanian Institute of Agrarian Economics, Kudirkos 18–2, LT-03105 Vilnius, Lithuania

Sustainability, 2019, vol. 11, issue 12, 1-15

Abstract: The European Union (EU) is an integrated alliance of equally treated Member States sharing mutual values, legal principles and markets. Close cooperation, deep integration and convergence are the major priorities for the EU. Anyway, these principles are not always reflected in the EU-wide policies which are implemented through financial support mechanisms. The direct payments financial support mechanism under the Common Agricultural Policy, the main instrument for promoting convergence in development of Member States’ agricultural sectors and rural sustainability, faces critique for failing to meet its objectives. One of the major deficiencies of the direct payments scheme is that it allocates more resources to already developed agricultural sectors of the older Member States and less resources to developing ones thus increasing the divergence among the Member States. The aim of this paper is to suggest new mechanisms for direct payment funds redistribution across the EU Member States which are based on the methodological principles that would more precisely correspond to the aims of convergence, transparency and fair redistribution. The results show that, regardless of the method chosen (to support more or less effective agricultural sectors of EU Member States), the proposed methodology lowers differences in direct payment rates among the EU Member States by two-fold. This ensures correspondence to the goal of convergence within the EU.

Keywords: direct payments; Common Agricultural Policy; convergence; production costs; European Union (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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