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Regional employment impacts of Common Agricultural Policy measures in Eastern Germany: A difference-in-differences approach

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  • Petrick, Martin
  • Zier, Patrick

Abstract

Politicians and farm lobbyists frequently use the argument that agricultural policy is necessary to safeguard jobs in agriculture. We explore whether this is true by conducting an econometric ex-post evaluation of the European Union’s Common Agricultural Policy (CAP) in the three East German States Brandenburg, Saxony, and Saxony-Anhalt. Whereas previous studies have employed descriptive statistics or qualitative methods and have looked at single policy instruments in isolation, we apply a difference-in-differences estimator to analyse the employment effects of the entire portfolio of CAP measures simultaneously. Based on panel data at the county level, we find that investment aids and transfers to less favoured areas had a zero marginal employment effect. We present evidence that full decoupling of direct payments in 2005 led to labour shedding, as it made transfer payments independent of factor allocation. Spending on modern technologies in processing and marketing and measures aimed at the development of rural areas led to job losses in agriculture. Agri-environmental measures, on the other hand, kept labour intensive technologies in production or induced them. This analysis calls into question whether an expansion of existing second pillar measures is a reasonable way to use funds modulated away from the first pillar.

Suggested Citation

  • Petrick, Martin & Zier, Patrick, 2010. "Regional employment impacts of Common Agricultural Policy measures in Eastern Germany: A difference-in-differences approach," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 93158, Humboldt University Berlin, Department of Agricultural Economics.
  • Handle: RePEc:ags:huscpw:93158
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    Cited by:

    1. Petrick, Martin & Zier, Patrick, 2012. "Common Agricultural Policy effects on dynamic labour use in agriculture," Food Policy, Elsevier, vol. 37(6), pages 671-678.
    2. Tocco, Barbara & Davidova, Sophia & Bailey, Alastair, 2013. "The Impact of CAP Payments on the Exodus of Labour from Agriculture in Selected EU Member States," Working Papers 160742, Factor Markets, Centre for European Policy Studies.
    3. Swinnen, Johan F.M. & Van Herck, Kristine & Vandemoortele, Thijs, 2012. "The Experience Economy as the Future for European Agriculture and Food?," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 1, April.
    4. Blomquist, Johan & Nordin, Martin, 2017. "Do the CAP subsidies increase employment in Sweden? estimating the effects of government transfers using an exogenous change in the CAP," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 13-24.
    5. Zier, Patrick, 2013. "Econometric impact assessment of the Common Agricultural Policy in East German agriculture," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 71, number 71.
    6. Blomquist , Johan & Nordin, Martin, 2013. "Do the CAP Subsidies Increase Employment in Sweden? Estimating the Open Economy Relative Multiplier Using an Exogenous Change in the CAP," Working Papers 2013:41, Lund University, Department of Economics.
    7. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, 2012. "Does the Common Agricultural Policy Reduce Farm Labour Migration? Panel data analysis across EU regions," Working Papers 128790, Factor Markets, Centre for European Policy Studies.
    8. Davidova, Sophia & Hennessy, Thia & Thomson, Ken, 2016. "Rural Jobs and the CAP: Spitting into the Wind?," 90th Annual Conference, April 4-6, 2016, Warwick University, Coventry, UK 236364, Agricultural Economics Society.
    9. Desjeux, Yann & Dupraz, Pierre & Latruffe, Laure & Maigne, Elise & Cahuzac, Eric, 2014. "Evaluating the impact of rural development measures on farm labour use: a spatial approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182817, European Association of Agricultural Economists.
    10. Sahrbacher, Amanda, 2012. "Impacts of CAP reforms on farm structures and performance disparities: An agent-based approach," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 65, number 65.
    11. Bartolini, Fabio & Brunori, Gianluca & Coli, Alessandra & Landi, Chiara & Pacini, Barbara, 2015. "Assessing the Causal Effect of Decoupled Payments on farm labour in Tuscany Using Propensity Score Methods," 2015 Conference, August 9-14, 2015, Milan, Italy 211200, International Association of Agricultural Economists.
    12. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, 2011. "Does Common Agricultural Policy Reduce Farm Labour Migration? A Panel Data Analysis Across EU Regions," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114597, European Association of Agricultural Economists.
    13. Martin Nordin, 2014. "Does the Decoupling Reform Affect Agricultural Employment in Sweden? Evidence from an Exogenous Change," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(3), pages 616-636, September.
    14. Sauer, Johannes & Walsh, John & Zilberman, David, 2013. "Agri-Environmental Policy Effects at Producer Level - Identification and Measurement," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156099, German Association of Agricultural Economists (GEWISOLA).
    15. Andrius Kazukauskas & Carol Newman & Johannes Sauer, 2014. "The impact of decoupled subsidies on productivity in agriculture: a cross-country analysis using microdata," Agricultural Economics, International Association of Agricultural Economists, vol. 45(3), pages 327-336, May.
    16. Berlinschi, Ruxanda & Swinnen, Johan F.M. & Van Herck, Kristine, 2012. "Subsidies and agricultural employment: The education channel," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126776, International Association of Agricultural Economists.
    17. Klepacka, Anna M. & Sobczyński, Tadeusz & Florkowski, Wojciech J. & Revoredo-Giha, Cesar, 2013. "Effects of the Common Agricultural Policy on Non-Family Farm Employment in Primary and Secondary Agricultural Areas," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150716, Agricultural and Applied Economics Association.
    18. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, "undated". "Reallocation of Agricultural Labor and Farm Subsidies: Evidence From the EU Regions," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126645, International Association of Agricultural Economists.
    19. Sauer, Johannes & Walsh, John & Zilberman, David, 2012. "Behavioural Change through Agri-Environmental Policies ? – A Distance Function based Matching Approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134783, Agricultural Economics Society.
    20. Rizov, Marian & Davidova, Sophia & Bailey, Alastair, 2016. "Employment effects of CAP payments in the UK non-farm economy," 160th Seminar, December 1-2, 2016, Warsaw, Poland 249793, European Association of Agricultural Economists.
    21. Dupraz, Pierre & Latruffe, Laure, 2015. "Trends in family labour, hired labour and contract work on French field crop farms: The role of the Common Agricultural Policy," Food Policy, Elsevier, vol. 51(C), pages 104-118.
    22. Ferjani, Ali & Zimmermann, Albert & Roesch, Andreas, 2015. "Determining Factors of Farm Exit in Agriculture in Switzerland," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 16(1), January.
    23. Sauer, Johannes & Walsh, John & Zilberman, David, 2012. "Producer Behaviour and Agri-Environmental Policies: A Directional Distance based Matching Approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124877, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Impact analysis; Agricultural employment; Common Agricultural Policy; Decoupling; Agribusiness; Agricultural and Food Policy; Agricultural Finance; Community/Rural/Urban Development; Labor and Human Capital; Q18; J43; R58;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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