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Distributional Impacts of CAP Adoption on Romanian Households

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  • Firici, M. Carmen
  • Thomson, Kenneth J.
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    Abstract

    This paper focuses on estimation of distributional economic welfare effects of the adoption of the CAP on different groups of Romanian households. The calculations of welfare effects are based on 1999 household data and refer to a 10-fold breakdown of Romanian households, i.e. five socio-economic categories from urban and rural areas, taking into account own (home) production of food. To identify the most vulnerable groups of Romanian consumers to food price changes, the Slutsky approximation Compensating Variation approach is applied. The results suggest that, if the current CAP is adopted and results in food price changes averaging a 10 per cent increase in all food prices, the lowest-income groups (i.e. urban and rural unemployed households, urban pensioner households) will be the most affected, ceteris paribus (prices of all other goods held constant). The minimum amount by which the groups could be compensated for the effect of price change on their real incomes varies between Euro 3 per month for employers' households (about 1% of total income) and about Euro 8 per month for farmers' households (6%). However, due to the relatively large shares of food self-production in total consumption, in particular by rural households, somewhat smaller money compensation would be appropriate.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24818.

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    Date of creation: 2002
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    Handle: RePEc:ags:eaae02:24818

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    Related research

    Keywords: distributional economic effects; CAP; Slutsky approximation; Compensating Variation; Romania; Agricultural and Food Policy;

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    1. Qaim, Matin, 2001. "A prospective evaluation of biotechnology in semi-subsistence agriculture," Agricultural Economics, Blackwell, vol. 25(2-3), pages 165-175, September.
    2. Pattichis, Charalambos A, 1999. "Cyprus in the EU: A Quantitative Analysis of Adopting the CAP," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(4), pages 511-32, December.
    3. Georgakopoulos, Theodore A, 1990. "The Impact of Accession on Food Prices, Inflation and Food Consumption in Greece," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(4), pages 485-93.
    4. Kola, Jukka, 1993. "Efficiency of Supply Control Programmes in Income Redistribution," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(2), pages 183-98.
    5. K. Balcombe & S. Davidova & J. A. Morrison, 1999. "Consumer Behaviour in a Country in Transition with a Strongly Contracting Economy: The Case of Food Consumption in Bulgaria," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 36-47.
    6. Hicks, J. R., 1986. "A Revision of Demand Theory," OUP Catalogue, Oxford University Press, number 9780198285502, Octomber.
    7. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
    8. Brown, Colin G, 1990. "Distributional Aspects of CAP Price Support," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(3), pages 289-301.
    9. Currie, John Martin & Murphy, John A & Schmitz, Andrew, 1971. "The Concept of Economic Surplus and its Use in Economic Analysis," Economic Journal, Royal Economic Society, vol. 81(324), pages 741-99, December.
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