Pavel Ciaian

Do agricultural subsidies crowd out or stimulate rural credit institutions? The Case of CAP Payments

In this paper we estimate the impact of subsidies from the EU’s common agricultural policy on farm bank loans. According to the theoretical results, if subsidies are paid at the beginning of the growing season they may reduce bank loans, whereas if they are paid at the end of the season they increase bank loans, but these results are conditional on whether farms are credit constrained and on the relative cost of internal and external financing. In the empirical analysis, we use farm-level panel data from the Farm Accountancy Data Network to test the theoretical predictions for the period 1995–2007. We employ fixed-effects and generalised method of moment models to estimate the impact of subsidies on farm loans. The results suggest that subsidies influence farm loans and the effects tend to be non-linear and indirect. The results also indicate that both coupled and decoupled subsidies stimulate long-term loans, but the long-term loans of large farms increase more than those of small farms, owing to decoupled subsidies. Furthermore, the results imply that short-term loans are affected only by decoupled subsidies, and they are altered by decoupled subsidies more for small farms than for large farms; however, when controlling for endogeneity, only the decoupled payments affect loans and the relationship is non-linear.

Economic and environmental impacts of CAP greening: CAPRI simulation results

In this report we analyse the economic and environmental impacts of CAP greening introduced by the 2013 CAP reform. We use the CAPRI farm-type layer, an extension of CAPRI by farm group module capturing farm heterogeneity across the EU. Its main advantage in the context of our analysis is that it allows the current implementation of the CAP greening measures to be depicted in high detail, while also capturing the environmental effects and the market feedback of the simulated policy changes. The simulated results reveal that the economic impacts (land use, production, price and income changes) of CAP greening are rather small, although some farm types, sectors (fallow land and pulses) or Member States may be affected more significantly. Simulation results show that the CAP greening will lead to a simultaneous small increase in prices and a small decrease in production. The latter impact is due to the greening obligations that require farms to take out of production a small share of land and to the slight reduction in farm productivity driven by the land reallocation effects of greening measures. Farm income slightly increases because the price effects offset the production decline. The results indicate that EFA and grassland measures tend to induce slightly higher economic effects relative to the crop diversification measure, nevertheless some variation across crops and economic indicators is observed. Similarly to economic effects, the environmental impacts of CAP greening are small, although some regions may see greater effects than others. In general, effects at EU level are positive on a per hectare basis, but the increase in UAA can reverse the sign for total impacts. Overall, simulated GHG and ammonia emissions decrease in the EU, while the total N surplus, soil erosion and biodiversity-friendly farming practices indicator slightly increase due to the CAP greening. The crop diversification measure tends to have the lowest environmental impacts, while the grassland measure has mixed (both positive and negative) effects on the reported environmental indicators. The EFA measures have positive impacts on most environmental indicators, except for soil erosion.

The Role of Additionality in the EU Cohesion Policies

Additionality is one of the key principles driving the functioning of the EU Cohesion Policies (ECP). The present paper studies how additionality affects the distributional effects of the ECP. Using the example of the firm-level investment support, we analyse the role of additionality and co-financing rate in differently competitive markets. We find that the investment additionality and the level of competition importantly affect the distributional effects of the ECP. Imposing additionality to the ECP investments in a perfectly competitive environment causes distortions in the capital market and leads to lower welfare levels. In contrast, without the enforcement of additionality, the distortions are zero and the support fully benefits firms. In an imperfectly competitive environment the firm-level investment support may increase capital use and may be welfare increasing with and without the enforcement of the investment additionality.

Conclusions and Policy Recommendations

This chapter draws conclusions and provides policy recommendations based on the findings of earlier chapters. This book has shown that, given the availability of large land resources and the low levels of current yields, Commonwealth of Independent States (CIS) countries are strong players in wheat global markets and have great potential to further increase their wheat production and exports, thus strengthening their contribution to global food security. Production growth can be achieved primarily by cultivating more land, increasing current yields and incorporating modern technologies into farming practices. However, the production potential of CIS countries can be realised fully only if the agricultural sector is supported by structural changes including (1) enhancing market institutions and property rights; (2) developing land markets, (3) improving access to credit; (4) creating a reliable and transparent policy-support framework (5), addressing climate and environmental challenges and (6) developing infrastructure.

Scenar 2030 - Pathways for the European agriculture and food sector beyond 2020 (Summary report)

Analysing stylised scenarios with economic modelling tools reveals complex relations, incentives and trade-offs of the different policy instruments, in particular regarding the environmental dimension. Marginal areas of the EU are most vulnerable to drastic policy changes.

Migration to the EU: Social and Macroeconomic Effects on Sending Countries

In June 2016, the European Commission issued a new EU Blue Card proposal. This proposal is meant to make the EU more attractive for highly qualified workers from third countries. While strengthening the knowledge economy of the EU, the potential impacts of the new Blue Card proposal on developing countries are less known. The present study attempts to shed light on potential challenges and opportunities for developing countries by analysing conceptually the potential socio-economic impacts of the new EU Blue Card proposal. Our results suggest that the EU Blue Card may reduce the human capital, the knowledge capital, and hence growth and development prospects in developing countries, if not accompanied by appropriate policy measures. We identify and examine a number of policy measures, which could help turning the sending country challenges into opportunities. Our results suggest that policies implemented on the demand side of the labour market are more efficient than policies that address the supply side of the labour market, though they are less costly to implement. Developing countries can also benefit from the knowledge diffusion from the EU, if sufficient human resources are available to use this knowledge.

Assessing the Social and Macroeconomic Impacts of Labour Market Integration: A Holistic Approach

In the age of globalisation and the knowledge economy, skill mobility is perceived as one of the key factors for fully unlocking the labour market potential. Assessing the social and macroeconomic impacts of increased skill mobility is an important though also challenging task, which requires a holistic approach. This study presents the dynamic spatial general equilibrium approach taken in the Regional Holistic Model (RHOMOLO) to better understand the relationship between education, skills, migration and economic growth. Two key channels of labour market adjustment -- upward skill mobility and spatial skill mobility -- are presented and explained in particular detail. By performing numerical simulations and conceptual analysis of labour market integration, we aim to facilitate understanding of the advantages and limitations of the approach taken in RHOMOLO, and its potential for education, skills and employment policy impact assessment. The results from our analysis suggest that a holistic approach is indeed crucial for capturing all the direct and indirect, short- and long-run effects, and it has a wide potential for assessing region-, sector- and skill-specific macroeconomic and social effects of policies aiming at integration e.g. of marginalised communities, such as Roma or refugees, into the EU labour markets.