The effects of the Common Agricultural Policy on exit strategies and land re-allocation

Abstract

This paper investigates how farm-households would dispose of farms following a decision by the farm-household to exit from farming, and in particular when a decision is made to sell the land The paper builds on data from a survey of stated intentions carried out in 9 EU countries at the beginning of 2009, using a probit Heckman model, where the model is applied to explain stated intentions to sell land in the case of farm-households that have decided to exit from farming activities, under two extreme Common Agricultural Policy (CAP) scenarios. The numbers of farm households opting to exit from agriculture increases sharply under the scenario characterised by the removal of the CAP. The statistically significant determinants are mostly consistent with previous studies, but show different behaviour when comparing the exit decision with the willingness to sell the farm. The outcomes of this study seem to deliver a clear policy message reinforcing the notion that the current CAP payments are important for staying in/exiting farming activities, but the land reallocation process clearly requires more targeted instruments. At the same time, greater attention should be paid to mechanisms of land rent or alternative land tenure solutions.