The impact of the Common Agricultural Policy on income distribution and welfare in Central and Eastern European Countries
AbstractIn this paper we develop a partial equilibrium model for agricultural sector to assess the impact of CEE integration with the EU on welfare and income distribution of agricultural factors. The modelling framework is based on the concept of market imperfections and transaction costs. We perform several policy simulations with different levels of direct payments as given in the most recent European Commission proposal. We find that even the most sceptical European Commission proposal of awarding the CEE farmers only 25% of the direct payments will increase welfare and income of farmers. However, the distribution of CAP rents are affected by the institutional structure. We find an adverse impact on allocation of incomes and welfare that are generated by the integration in Slovakia and in the Czech Republic. The major part of it - between 65% to 93% - is transferred to owners of production factors, such as hired labour, landowners and variable capital suppliers, but not as desired to support farmer incomes. In Poland the gains resulting from the integration are allocated more favourably to farmers. Factor owners retain only around 24% to 61%, depending on the level of direct payments.
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Bibliographic InfoPaper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2002_02.
Length: 40 pages
Date of creation: Mar 2002
Date of revision:
Partial equilibrium; model CAP; EU enlargement; Common Agricultural Policy; Decoupling; Computable General Equilibrium;
Find related papers by JEL classification:
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation
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