Disaggregated Impacts of CAP Reforms

Proceedings of an OECD Workshop

image of Disaggregated Impacts of CAP Reforms

The Common Agricultural Policy (CAP) is an important policy for the European Union and accounts for about 40% of the EU budget. Ever since its inception in 1958, the CAP has been regularly reviewed and adjusted to improve its performance and adapt to changing circumstances. At a time when the post-2013 future of the CAP is being discussed and major challenges such as food security and climate change lay ahead, it is important to review the impact of past reforms and to draw lessons for the design of future policies.

While the studies in these proceedings often take account of national and international market effects of agricultural policies, they tend to focus on the impact of policies on farms and at the regional and local levels. Today, the European Union is composed of very diverse regions that are affected very differently by any given farm policy, depending on the structural characteristics of the farms’ and regions’ economies.

This report collects papers presented at the OECD Workshop on Disaggregated Impacts of CAP Reforms, held in Paris in March 2010, which focused on recent reforms. In particular, it examined the implementation of the single payment scheme since 2005 and the transfer of funds between different measures. Special attention was also paid to reforms of the sugar and dairy sectors with respect to the quota system and the restructuring of both these industries. The papers also look at the impact of the new direct payment system on land use, production and income.


The impact of decoupling and modulation in the European Union: a sectoral and farm level assessment

This chapter presents the main findings from the IDEMA project on the impact of the single payment scheme on production, prices, trade flows, farm income and structural change at the European Union and regional levels. Three complementary evaluation approaches were used: surveys of farmers’ intentions, sector modelling and agent-based models of regional structural change. The findings provide no strong evidence that farmers intend to change their strategic decision to exit agriculture. Instead, structural change is shown to slow down when payments are more decoupled because minimal land management becomes an additional source of income. The reform has increased the market orientation of EU farmers and has reduced trade distortions. The single payment scheme is shown to increase farm incomes, but also land rental prices in most regions. Capitalization of payments into land values over time will, however, erode the ability of the reform to support incomes in the long run as incumbent farmers retire or otherwise leave the sector. The impact of the reform would have been very different if there had been no link between the decoupled payment and land.


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