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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


  • von Witzke, Harald
  • Noleppa, Steffen


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.

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  • 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 Agricultural Economics.
  • Handle: RePEc:ags:huiawp:10289

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    References listed on IDEAS

    1. Paul Allanson, 2006. "The Redistributive Effects of Agricultural Policy on Scottish Farm Incomes," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 117-128, March.
    2. Amiel, Yoram & Cowell, Frank & Polovin, Avraham, 1996. "Inequality among the Kibbutzim," Economica, London School of Economics and Political Science, vol. 63(250), pages 63-85, Suppl..
    3. Graham Pyatt & Chau-nan Chen & John Fei, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 451-473.
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    Cited by:

    1. 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), issue 2, August.
    2. 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.
    3. 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.
    4. 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.
    5. 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.

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