The Regional Allocation of EU Producer Support: How Natural Conditions and Farm Structure Matter

Abstract

The redistributive implications of the Common Agricultural Policy (CAP) of the European Union (EU) have regained a strong interest in recent years since economic and social cohesion has become a major goal of European policy. The empirical evidence is surprisingly diverse and ranges from a clearly positive to a clearly negative regional redistributive impact of the CAP. Therefore, the objectives of this paper are threefold. First, the interregional allocation of EU producer support under the CAP is measured at the NUTS III-level in the period 1986-2002 for 26 regions of the German Bundesland Hesse. Second, the role of the measurement concept for the magnitude and distribution of the regional transfers is elaborated. Third, the interregional allocation of EU producer support is explained by natural conditions and farm structure variables within a quantitative analysis. A major result is that the interregional allocation of producer support is unequal, depends on the measure of protection used and is affected by a number of variables characterizing farm structure and natural conditions.