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Estimating the Effects of the European Agricultural Fund for Rural Development in Italy

Author

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  • Debora Insolda

    (University of Palermo)

  • Marco Maria Matarrese

    (University of Foggia)

  • Francesco Frangiamore

    (University of Palermo)

Abstract

The European Agricultural Fund for Rural Development (EAFRD) is an important part of the European Union's strategies under the Common Agricultural Policy (CAP). It contributes to the development of rural areas through both public and private investments. However, in the short term, there can be ambiguous effects of European funds in these areas. The aim of this paper is to examine the short-term dynamic effects of the EAFRD on the economy of the Italian regions and their agricultural sector. Using a Structural Vector Autoregressive (VAR) model on a panel of 21 NUTS-2 regions, over the period 1995–2018, we find significant positive impacts on both regional economic activity, agricultural sector output and private investment in the agricultural sector. However, EAFRD spending causes temporary job losses in the agricultural sector, highlighting the effects of labour substitution by investments in innovation. The effects are more pronounced in regions with larger agricultural sectors and become stronger after the 2003 Fischler reform.

Suggested Citation

  • Debora Insolda & Marco Maria Matarrese & Francesco Frangiamore, 2025. "Estimating the Effects of the European Agricultural Fund for Rural Development in Italy," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 11(3), pages 1301-1334, November.
    • Handle: RePEc:spr:italej:v:11:y:2025:i:3:d:10.1007_s40797-024-00289-z
    DOI: 10.1007/s40797-024-00289-z
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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