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Distributional Effects of CAP Subsidies: Micro Evidence from the EU

Jerzy Michalek, Pavel Ciaian, d'Artis Kancs and Sergio Gomez Y Paloma

No 102978, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: In this paper we estimate the income distributional effects of the common agricultural policy (CAP) for farmers and landowners. First, we theoretically analyse the level of farmers' and landowners' gains from coupled and decoupled payments. Second, using a unique farm level panel data set from the FADN for the period 1995-2007 we employ the fixed effects, the Heckman selection bias and the GMM estimators to estimate income distributional effects of CAP subsidies. The results do not confirm the theoretical hypothesis that landowners benefit a large share of the CAP subsidies. According to our estimates, farmers gain between 60% to 95%, 80% to 178% and 86% to 90% of the total value of coupled crop/animal, coupled RDP and decupled payments, respectively. The CAP subsidies are only marginally capitalised in land rents. Our results suggest that rental rates are more responsive to structural variables and show a strong time dependency, suggesting the presence of rigidities in the EU rental markets, which constraint the adjustment of land rents to market signals and thus reduce landowners' gains from the CAP.

Keywords: Agricultural and Food Policy; Agricultural Finance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-eur
Date: 2011
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Related works:
Working Paper: Distributional Effects of CAP Subsidies: Micro Evidence from the EU (2011) Downloads
Working Paper: Distributional Effects of CAP Subsidies: Micro Evidence from the EU (2010) Downloads
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