The Common Agricultural Policy and productivity gains in Romanian agriculture: is there any evidence of convergence to the Western European realities?

Abstract

When Romania joined the European Union (EU) in 2007, it did so with signifi cant structural drawbacks. This paper investigates, in this context, the infl uence of the considerable levels of fi nancial support given under the Common Agricultural Policy (CAP) on the overall productivity of Romanian agriculture. Using data for a 15-year time horizon (1998-2013), we show that the policy incentives have not yet produced any positive effects on the Total Factor Productivity index. Moreover, the increases in the input index remain higher than the output index, reducing the overall productivity of Romanian agriculture. This is explained by a low share of high value-added products in the total agricultural production and agricultural structures that are not yet compatible with those of Western Europe. The new CAP fi nancial allocation must correct these negative fi ndings by supporting new investments in the food processing industry and the better marketing of agricultural products.