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Agricultural and Trade Policy Reform and Inequality: The Distributive Effects of Direct Payments to German Farmers under the EU's New Common Agricultural Policy

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  • von Witzke, Harald
  • Noleppa, Steffen

Abstract

The Common Agricultural Policy (CAP) of the European Union has been in a process of reform since the early 1990s. As a result of reforms, agricultural market regulations have become more liberal and direct payments have been introduced which are to a large extent decoupled from production. In this paper, we analyze the effects of the direct payments to farmers on inequality of profits in German agriculture. For this purpose, we decompose measures of absolute and relative inequality in total farm profits into the partial effects of the direct payments and all other profit determinants. Key results of the analysis are that the system of direct payments under the New CAP accounts for about one third of the observed inequality in family farms and for almost two thirds of inequality in the large incorporated farms.

Suggested Citation

  • von Witzke, Harald & Noleppa, Steffen, 2007. "Agricultural and Trade Policy Reform and Inequality: The Distributive Effects of Direct Payments to German Farmers under the EU's New Common Agricultural Policy," Working Paper Series 10289, Humboldt University Berlin, Department of Agricultural Economics.
  • Handle: RePEc:ags:huiawp:10289
    DOI: 10.22004/ag.econ.10289
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    References listed on IDEAS

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    1. Stefano Ciliberti & Angelo Frascarelli, 2018. "The CAP 2013 reform of direct payments: redistributive effects and impacts on farm income concentration in Italy," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-18, December.
    2. Stefano Ciliberti & Luca Palazzoni & Sofia Maria Lilli & Angelo Frascarelli, 2022. "Direct Payments to Provide Environmental Public Goods and Enhance Farm Incomes: Do Allocation Criteria Matter?," Review of Economics and Institutions, Università di Perugia, vol. 13(1-2).
    3. Nitta, Atomu & Yamamoto, Yasutaka & Kondo, Katsunobu & Sawauchi, Daisuke, 2020. "Direct payments to Japanese farmers: Do they reduce rice income inequality? Lessons for other Asian countries," Journal of Policy Modeling, Elsevier, vol. 42(5), pages 968-981.
    4. Severini, Simone & Tantari, Antonella, 2013. "The effect of the EU farm payments policy and its recent reform on farm income inequality," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 212-227.
    5. S. Severini & A. Tantari, 2015. "Which factors affect the distribution of direct payments among farmers in the EU Member States?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(1), pages 25-48, February.
    6. Galluzzo Nicola, 2020. "A Technical Efficiency Analysis of Financial Subsidies Allocated by the Cap in Romanian Farms Using Stochastic Frontier Analysis," European Countryside, Sciendo, vol. 12(4), pages 494-505, December.
    7. Nicola Galluzzo, 2021. "Estimation of the impact of CAP subsidies as environmental variables on Romanian farms," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(3), pages 1-24.
    8. Severini, Simone & Tantari, A., 2012. "How direct payments and their reform have affected farm income inequality in Italy?," 2012 First Congress, June 4-5, 2012, Trento, Italy 124099, Italian Association of Agricultural and Applied Economics (AIEAA).
    9. Severini, Simone & Tantari, Antonella, 2014. "The contribution of different off-farm income sources and government payments to regional income inequality among farm households in Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(2), pages 1-17, August.
    10. 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.
    11. El Benni, Nadja & Finger, Robert, 2013. "The effect of agricultural policy reforms on income inequality in Swiss agriculture - An analysis for valley, hill and mountain regions," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 638-651.
    12. Deppermann, Andre & Grethe, Harald & Offermann, Frank, 2011. "An ex-ante analysis of distributional effects of the CAP on western German farm incomes," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99428, European Association of Agricultural Economists.
    13. Galluzzo, Nicola, 2015. "Analysis of impact of rural development subsides on cropping specialization in Bulgaria and Romania using FADN data," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212659, European Association of Agricultural Economists.
    14. Severini, Simone & Tantari, Antonella, 2015. "The distributional impact of agricultural policy tools on Italian farm household incomes," Journal of Policy Modeling, Elsevier, vol. 37(1), pages 124-135.
    15. El Benni, Nadja & Mann, Stefan & Lehmann, Bernard, 2011. "Distributional effects of direct payments in Switzerland," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99368, European Association of Agricultural Economists.

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    Agricultural and Food Policy;

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