Income distributional effects of CAP subsidies. Micro evidence from the EU

This paper studies the income distributional effects of three main instruments of the Common Agricultural Policy (CAP) in the EU: the Coupled Direct Payments (CDP), the Rural Development Programme (RDP) and the Single Payment Scheme (SPS). We use a large set of cross-country farm level panel data for the EU covering the period 1999-2007, and employ the GMM estimator, which allows us to address important sources of endogeneity. According to our results, farmers gain 66-72%, 77-82%, and 93-109% from the CDP, SPS and RDP, respectively. These results suggest that the initiated shift in the CAP expenditure from the support of farm production activities toward supporting rural development and the provision of public goods and externalities is also in line with respect to supporting farmers' income.JRC.J.4-Agriculture and Life Sciences in the Econom