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CAP reform and its impact on structural change and productivity growth: A cross country analysis


  • Kazukauskas, Andrius
  • Newman, Carol F.


The recent reforms of the Common Agricultural Policy (CAP) have exposed the European agricultural sector to a new set of constraints and challenges. The decoupling of direct payments from production is expected to make production decisions more market-oriented as farmers move from mainly subsidy revenue maximization objectives toward profit maximizing behaviour. However, ex-post analyses of the productivity of farms have yet to uncover any evidence of a positive effect of the decoupling policy on farm productivity. Using the Irish, Danish and Dutch farm level data, we identify the extent to which both system and product switching after the introduction of decoupling has occurred and to what extent these changes have contributed to productivity growth in the agriculture. We find some evidence that the decoupling policy had positive significant effects on farm productivity but the product switching behaviour associated with the changes in farm decoupling rates have not led to productivity improvements.

Suggested Citation

  • Kazukauskas, Andrius & Newman, Carol F., 2010. "CAP reform and its impact on structural change and productivity growth: A cross country analysis," 114th Seminar, April 15-16, 2010, Berlin, Germany 61103, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa114:61103

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    References listed on IDEAS

    1. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, September.
    2. Nigel Key & Ruben N. Lubowski & Michael J. Roberts, 2005. "Farm-Level Production Effects from Participation in Government Commodity Programs: Did the 1996 Federal Agricultural Improvement and Reform Act Make a Difference?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1211-1219.
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    Cited by:

    1. Arovuori, Kyösti & Yrjölä, Tapani, 2015. "The impact of the CAP and its reforms on the productivity growth in agriculture," 147th Seminar, October 7-8, 2015, Sofia, Bulgaria 212241, European Association of Agricultural Economists.
    2. Jaraite, Jurate & Kažukauskas, Andrius, 2011. "The effect of mandatory agro-environmental policy on farm environmental performance," CERE Working Papers 2011:13, CERE - the Center for Environmental and Resource Economics.

    More about this item


    productivity; semiparametric estimation; farming; decoupling; Agricultural and Food Policy; Farm Management; Land Economics/Use; D24; Q12; Q18;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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