Tag: CAP

The paper estimates the firm level impact of the Common Agricultural Policy (CAP) investment subsidies on gross value added, profits, employment, and productivity of farms in Slovakia, and evaluates the effectiveness of support provided through the Rural Development Programme. We employ a Propensity Score Matching Difference-in-Differences econometric approach on a database of commercial farms for the period 2006-2015. The results of this paper show that the farm investment support stimulated growth of gross value added, farm profits, and employment in the agricultural sector, while it reduced labour productivity. Investment support helped to maintain rural jobs, which occurred partly at the expense of labour productivity. The paper stresses high deadweight costs of investment support within the CAP, which should be considered when planning and implementing new CAP interventions.

The original CAP’s high levels of border protection on many products involved a variable import levy bridging the gap between world prices and the EU’s much higher minimum import price. The Uruguay Round ended this, but tariffication also meant that subsequent CAP reforms reducing EU levels of domestic market price support would no longer trigger lower tariffs. Moreover the Doha Round’s plans for tariff cuts are in abeyance. The consequences are: i) for these products, only preferential sup¬pliers penetrate the EU’s protected market; ii) negotiation of Free Trade Areas is made more complicated; and iii) “Brexit” is problematic.

The debate on reforming the Common Agricultural Policy (CAP) after 2020 had already started when the European Commission published its own vision on the future of agriculture and food production in the European Union. One of the key aspects of this debate relates to the revision of the system of EU direct payments by revising degressivity and capping rules. Although it has, for a long time, been a popular idea to limit payments to larger farms in one way or another, and subsidise smaller agricultural holdings instead, this idea has serious drawbacks as this paper shows. The aim of this study is to analyse the impact of degressivity and capping on European farm structures by reviewing existing literature on the topic as well as by providing new evidence from Hungary. Results suggest that placing a cap on direct payments may be causing more harm than good in terms of land use change.

When Romania joined the European Union (EU) in 2007, it did so with significant structural drawbacks. This paper investigates, in this context, the influence of the considerable levels of financial support given under the Common Agricultural Policy (CAP) on the overall productivity of Romanian agriculture. Using data for a 15-year time horizon (1998-2013), we show that the policy incentives have not yet produced any positive effects on the Total Factor Productivity index. Moreover, the increases in the input index remain higher than the output index, reducing the overall productivity of Romanian agriculture. This is explained by a low share of high value-added products in the total agricultural production and agricultural structures that are not yet compatible with those of Western Europe. The new CAP financial allocation must correct these negative findings by supporting new investments in the food processing industry and the better marketing of agricultural products.