Contribution of the Common Agricultural Policy to agricultural productivity of EU regions during 2004–2012 period

Abstract

The aim of this paper is to investigate the influence of Common Agricultural Policy (CAP) subsidies on agricultural (labour and total factor) productivity growth of EU regions during the period 2004–2012. The objective is to assess the impact of this policy on agricultural growth and competitiveness of regions, first in the aftermath of the fundamental reforms of the decoupling policy and second during the historic eastward enlargement of the EU, which deepened asymmetric spatial patterns and may have led to the CAP having a different spatial impact. The analysis uses an econometric approach based on an augmented Cobb-Douglas production function. The impact is proved to be mixed; positive when the change of subsidies with a 1-year lag is considered, which is related to farm strategies, and negative when the level of subsidies, which is based on reference data, is considered. In the case of the new member states, the effect is negative, confirming the CAP’s incompatibility with the agricultural structures of the area.