The interregional and intertemporal allocation of EU producer support: magnitude and determinants

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. It is the objective of this study to add new empirical evidence to this discussion and to identify some of the reasons why earlier results might have differed so strongly. To do so, we first measure the interregional distribution of EU producer support over time with various indicators of support. Computations are based on the NUTS-III level in the period 1986-2002 for 26 regions of the German Federal State of Hesse. Afterwards, the interregional allocation of producer support is explained by natural conditions, farm structure variables and economic development within a quantitative analysis. A major result is that the interregional allocation of producer support is (i) unequal and is (ii) affected by a number of variables characterizing farm structure and natural conditions. To what extent the interregional distribution of support is consistent with the political objective of cohesion depends on some crucial factors, i.e. how support is measured, the period of analysis, the methodological approach of a correlation versus a causality analysis, and the diversity of regions included.