Distributive Effects of the EU's New Common Agricultural Policy in German Agriculture
In the course of the process of reform of the EU's Common Agricultural Policy (CAP), traditional farm subsidies - such as import levies or export subsidies - have to a large extent been replaced by direct payments. These new subsidies are for the most part decoupled from actual production decisions. However, the CAP continues to be the single most important source of budgetary expenditures in the EU. In 2005, the CAP accounted for about 40 percent of total EU outlays, and in 2006 it is expected that the budget cost of the EU will reach an all time high. In this publication, Harald von Witzke and Steffen Noleppa present the results of an analysis quantifying the effects of the direct payments on profit inequality in German agriculture. The analysis has been based on bookkeeping data from both farms with a single operator or with limited numbers of partners, and incorporated farms. No individual farm data has been available. Rather the data was grouped by profit class.