The common agricultural policy and the determinants of changes in EU farm size

Abstract

Structural change provides the possibility of increasing the competitiveness and efficiency of the entire agricultural sector through a better allocation of productive factors. Amongst the productive factors, land is the one that most often limits farm development. This paper seeks to identify determinants of intended changes in farm size (represented by farmed area and measured as a reduction, expansion or no change) identified as stated intentions expressed through survey information, under two different Common Agricultural Policy (CAP) scenarios: (1) the Baseline, characterised by the Health Check policy as of 2009; and (2) a No-CAP scenario, assuming the elimination of all CAP payments and regulatory measures. Results highlight that CAP abolishment strongly reduces the intention to increase the amount of farmed area; the determinants of change in farmed area also change sharply amongst the two scenarios. Geographic variables, and farm characteristics such as farm organisation and the number of on-farm employees are relevant to explain the farmed area expansion. On the contrary, without the CAP, the relation between household and farm has strong effects on the different directions of change of farmed area. The results confirm that the different single payments scheme models affect the changes in demand of land.