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The impact of the Common Agricultural Policy on income distribution and welfare in Central and Eastern European Countries

  • Pavel Ciaian

In this paper we develop a partial equilibrium model for agricultural sector to assess the impact of CEE integration with the EU on welfare and income distribution of agricultural factors. The modelling framework is based on the concept of market imperfections and transaction costs. We perform several policy simulations with different levels of direct payments as given in the most recent European Commission proposal. We find that even the most sceptical European Commission proposal of awarding the CEE farmers only 25% of the direct payments will increase welfare and income of farmers. However, the distribution of CAP rents are affected by the institutional structure. We find an adverse impact on allocation of incomes and welfare that are generated by the integration in Slovakia and in the Czech Republic. The major part of it - between 65% to 93% - is transferred to owners of production factors, such as hired labour, landowners and variable capital suppliers, but not as desired to support farmer incomes. In Poland the gains resulting from the integration are allocated more favourably to farmers. Factor owners retain only around 24% to 61%, depending on the level of direct payments.

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Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2002_02.

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Length: 40 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:eei:rpaper:eeri_rp_2002_02
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  1. Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
  2. de Crombrugghe, Denis & Palm, Franz C & Urbain, Jean-Pierre, 1997. "Statistical Demand Functions for Food in the USA and the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(5), pages 615-37, Sept.-Oct.
  3. Banse, Martin & Münch, Wolfgang & Tangermann, Stefan, 2000. "Eastern Enlargement of the European Union: General and Partial Equilibrium Analysis," 2000 Conference, August 13-18, 2000, Berlin, Germany 197223, International Association of Agricultural Economists.
  4. Anderson, Kym & Tyers, Rodney, 1993. "Implications of EC Expansion for European Agricultural Policies, Trade and Welfare," CEPR Discussion Papers 829, C.E.P.R. Discussion Papers.
  5. Lluch, Constantino & Powell, Alan, 1975. "International comparisons of expenditure patterns," European Economic Review, Elsevier, vol. 6(3), pages 275-303, July.
  6. Johan F. M. Swinnen, 1999. "The political economy of land reform choices in Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(3), pages 637-664, November.
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