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Assessing the impacts of EU's common agricultural policy on regional convergence: sub-national evidence from Germany

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  • Heiko Hansen
  • Ramona Teuber

Abstract

This article assesses the relationship between transfers arising from EU's Common Agricultural Policy (CAP) and convergence in both farmers' revenues and interpersonal income redistribution using a sample of 26 regions in the state of Hesse, Germany, over the period 1979 to 2004 and 1991 to 2004, respectively. We thereby combine the concept of sigma convergence with Shorrock's inequality decomposition in order to determine the driving forces in distributional dynamics of farmers' revenues. Additionally, we apply alternative methodologies to investigate how per capita incomes have evolved over time. Explicitly comparing the situations with and without transfers, our results indicate that the CAP tends to smooth differences in farmers' revenues across regions, but does not impede a strong divergence through time. The latter is mainly driven by increasing structural differences between the regions, while disparities in intensity turn out to be less important. The empirical analysis also shows that CAP transfers reduce income inequality within society as a whole. However, this impact proved to be negligible in explaining distributional dynamics and growth of per capita incomes.

Suggested Citation

  • Heiko Hansen & Ramona Teuber, 2011. "Assessing the impacts of EU's common agricultural policy on regional convergence: sub-national evidence from Germany," Applied Economics, Taylor & Francis Journals, vol. 43(26), pages 3755-3765.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:26:p:3755-3765
    DOI: 10.1080/00036841003724395
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    Cited by:

    1. Hansen, Heiko & Herrmann, Roland, 2012. "The two dimensions of policy impacts on economic cohesion: Concept and illustration for the CAP," Food Policy, Elsevier, vol. 37(4), pages 483-491.
    2. Deppermann, Andre & Grethe, Harald & Offermann, Frank, 2011. "Distributional Effects of the CAP on Western German Farm Incomes and Regional Farm Income Disparity," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114442, European Association of Agricultural Economists.
    3. A. Palestini & G. Pignataro, 2013. "A multi-factor inequality approach to a transfer scheme: the case of Common Agricultural Policy," Working Papers wp891, Dipartimento Scienze Economiche, Universita' di Bologna.

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