Macroeconomic and welfare effects of the CAP reform and further decoupling of agricultural support in Finland: A CGE modelling approach

Abstract

Abstract We evaluate the overall economic effects of decoupled agricultural payments in Finland. The EU Common Agricultural Policy reform implemented in 2006 means shifting farm subsidies from production output and capital to farmland. Since decoupling seems to be a prominent trend in agricultural policy, we also simulate a case in which some national subsidies are decoupled from production as well. The decoupled support is tied equally to the hectares of arable land owned by farmers, other entrepreneurs, white and blue collar workers, pensioners and other households. This study takes the ownership structure of farmland between these household groups explicitly into account. We evaluate the overall impact of these changes on agricultural production, income and the welfare of various households. The computable general equilibrium GemRur simulation model of Finland is our working tool. We find that decoupling farm payments from production, especially if extended to national subsidies, will increase agricult...