An input-output approach in assessing the CAP reform impact of extensive versus intensive farming systems on rural development: The case of Greece

Abstract

This paper analyses the role of the extensive versus the intensive farming systems in the regional economy of a Greek rural area, Trikala, and assesses the impact of the shift of land resources from intensive to extensive systems, due to CAP reform. The construc- tion of an input-output table through the GRIT technique is applied for (a) an agricul- ture-centred multiplier analysis of the farming systems and (b) an impact analysis of the changes in farm land uses on the regional economy, by exogenizing the output of the agricultural farming systems. The results indicate a reduction in the output of the re- gion's economy. In the Mid-term review of the CAP (2003/2004), the EU took a step towards strengthening the multifunctional role of agriculture by implementing decoupling, modulation and cross-compliance. In the same period, environmental protection and land management has become a key policy objective (Axis 2) of the EU rural de- velopment policy. These significant changes have introduced reallocation of land re- sources from intensive to extensive farming systems and have initiated restructuring in agriculture and in rural areas. Under these circumstances, the analysis of the impact of extensive vs intensive farm- ing systems on the development of rural areas should identify: (a) the farming systems which create the strongest backward linkages with the other sectors of the economy and contribute to the economic development of the area; and (b) how farm land reallocation from intensive to extensive crops, due to CAP reform, affects the total output of the re- gional economy. In order to fulfill these objectives, this paper focuses on the application of the input- output technique, with particular attention to the role of different farming systems in the rural economy, through final demand multiplier analysis. Often however, agricultural policies or other external factors induce exogenous changes in sectors' output which do