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Allocation of CAP modulation funds to rural development measures at the regional level in Finland

  • Hyytia, Nina
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    Further coordination and coherence of the EU funds and policies has been increasingly called for, implying that the territorial perspectives should be included as a major element in the future policies. In this paper, CAP modulation is considered in a framework of a regional development such that it compares the effects on modulation funds first, as they are allocated as income subsidies to farm related, diversified economic activities and second, as they are channeled from agriculture to increased regional investment demand. A rural-urban Social Accounting Matrix is used as a base year data for the CGE-model. The results suggest that transferring CAP payments from actual agriculture as income support to diversified activity does not promote rural development and economic activity measured at the regional level. Accordingly, traditional agriculture seems to be able to exploit the subsidies more efficiently. On the contrary, the investment shocks resulted in positive total impacts in terms of the gross regional domestic product and regional employment. However, the positive GDP impacts were greater in the urban area, thus suggesting possible agglomeration development.

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    File URL: http://purl.umn.edu/114525
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    Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114525.

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    Date of creation: 2011
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    Handle: RePEc:ags:eaae11:114525
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    1. Roberto Esposti, 2007. "Regional Growth and Policies in the European Union: Does the Common Agricultural Policy Have a Counter-Treatment Effect?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(1), pages 116-134.
    2. Deborah Roberts, 2000. "The Spatial Diffusion of Secondary Impacts: Rural-Urban Spillovers in Grampian, Scotland," Land Economics, University of Wisconsin Press, vol. 76(3), pages 395-412.
    3. Oliver Balkhausen & Martin Banse & Harald Grethe, 2008. "Modelling CAP Decoupling in the EU: A Comparison of Selected Simulation Models and Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 57-71, 02.
    4. Risto Vaittinen, 2004. "Trade Policies and Integration - Evaluations with CGE Models," Research Reports 109, Government Institute for Economic Research Finland (VATT).
    5. Rizov, Marian, 2004. "Rural development and welfare implications of CAP reforms," Journal of Policy Modeling, Elsevier, vol. 26(2), pages 209-222, February.
    6. Robinson, Sherman & Cattaneo, Andrea & El-Said, Moataz, 1998. "Estimating a social accounting matrix using cross entropy methods:," TMD discussion papers 33, International Food Policy Research Institute (IFPRI).
    7. Round, Jeffrey I, 1985. "Decomposing Multipliers for Economic Systems Involving Regional and World Trade," Economic Journal, Royal Economic Society, vol. 95(378), pages 383-99, June.
    8. Karine Daniel & Maureen Kilkenny, 2009. "Agricultural Subsidies and Rural Development," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 504-529.
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