Impacts of CAP reform on rural employment: A multi-modeling cross country approach

Transcription

1 Impacts of CAP reform on rural employment: A multi-modeling cross country approach Konstadinos Mattas 1 Filippo Arfini 2 Peter Midmore 3 Michael Schmitz 4 Yves Surry 5 1 Aristotle University of Thessaloniki, School of Agriculture, Dept. of Agricultural Economics 2 University of Parma, Dept. of Economics, Section of Agricultural Economics 3 University of Wales Aberystwyth, School of Management and Business 4 Justus-Liebig-University of Giessen, Institute of Agricultural Policy and Market Research 5 Swedish University of Agricultural Sciences, Dept. of Economics Paper presented at OECD workshop Paris, march 2010

2 Presentation Outline Introduction Methodological Approach The Regions Background Cross-Region Assessment Main Results Concluding Remarks Policy Recommendations

3 Introduction CAP Reform: Long streamline process reaching the peak during the 2003 reform. Expected impacts affect the entire regional economy. Employment levels will be affected within the farming sector. Non-agricultural sector may be affected too. EU citizens and policy makers are strongly interested in understanding the effects of CAP reforms on employment levels. A study focused on rural employment levels could contribute to: assess current CAP reform. implement more effective policies in the future.

4 Main Objective Understand how and why CAP reforms (Pillar I and Pillar II) influence the rural employment in a multi-modeling and cross country context

5 Methodological Approach Five EU regions (NUTS II): Emilia Romagna (Italy) East Wales (UK) Anatoliki Makedonia and Thraki (Greece) Östergötland (Sweden) Kassel (Germany) Three discrete methodologies Qualitative analysis in depth interviews Positive Mathematical Programming (PMP) Input - Output (I/O) analysis

6 1. Qualitative Analysis Mixed-method case study focused on Pillar II effects. Two-stage data gathering process: investigation of secondary data in-depth interviews with stakeholders in each region 2. Positive Mathematical Programming Identify and measure policy induced changes at farm level and then at regional level. Utilizing FADN Data. Three policy scenarios Baseline: farm structure before application of horizontal regulation EC 1782/2003 Scenario 2 (S2): full decoupling Scenario 3 (S3): full decoupling plus price variations

7 3. Input-Output analysis Assessing CAP s impacts on output, household income and employment. Construction of I/O tables (GRID technique) Upgrade using survey data on rural economic transactions. Estimation of I/O coefficients Chenery & Watanabe direct linkages Rasmussen & Hirschman linkages Mattas & Shrestha I/O elasticities Papadas & Dahl supply multipliers The coefficients exposed the most important sectors to enhance regional employment, income and output levels and estimate indirect and total economic impacts.

8 The Regions Background Relatively large and internally diverse. Rural heterogeneity between and within the regions. Östergötland Sweden East Wales UK Kassel Germany Emilia Romagna Italy Southern Great Plain Hungary Anatoliki Makedonia & Thraki Greece

9 Key characteristics of the regions: Growing population-large number of cooperatives (Emilia Romagna) High percentage of employment in agriculture (Anatoliki Makedonia Thraki) Shortage of affordable rural housing-under funding of Pillar II (East Wales) Severe demographic problems (Kassel) Focus on rural entrepreneurship-high standards of IT infrastructure (Östergötland) Diversities regarding: Significance of agriculture s contribution to regional economy and employment. Infrastructure (transport links, health, education, IT provision). Economic development. RDP implementation.

10 Cross-Region Assessment Qualitative Assessment of CAP Impacts Rural economy strictly depends on the degree of received support from Pillar II. Unequal distribution of support from Pillar I. Pillar I creates subsidy-dependence cultures and has negative employment consequences. Young people and women seem to be more affected by the negative employment effects generated by the CAP reform. Lack of coherence between policies that leads to confusion. Uncertainty about the duration of Pillar II measures along with bureaucracy shrink long-term employment effects. Pillar II reduces the labour outflows, stabilizes farm employment, and creates new jobs. Pillar II appears effective in identifying and supporting new opportunities in farm diversification.

11 Overview of qualitative results on CAP s impacts Main Themes Rural Development Programmes Rural Development Programmes Main CAP reform objectives Pill ar I support Pillar I support Rural Economic Relations CAP R ural economy CAP Rural economy CAP Rural economy CAP Rural economy CAP Rural economy CAP Rural economy Unanimously agreed Perceptions Agricultural sector receives disproportionate support Determinant for the rural economy To uphold labour in agriculture and not to increase labour Creates unequal income distribution Streamlining of but not abolishing Need for further modifications As currently ineffective on inappropriate in CAP measures Pillar I and Pillar II Gradual move towards Pillar II Interaction between CAP and CAP - other Lack of coherence other policies policies Bureaucracy further deters RDP participation RDP poorly managed Waste of scarce resources Rural Development Programmes CAP - Sustain current employment levels or at employment least suspend further decline Preserves environment to a large extend No significant effect on women s employment Diversification and infrastructure support can enhance employment opportunit ies

12 PMP Changes on Farming Activities and Employment Land Allocation Decoupling favours cost minimization and substitution towards other crops (mainly fodder crops: higher returns under the new regime). Livestock structure Modifications recorded due to changes in subsidies and feeding crops. Milk cows and sheep livestock will remain at the same levels - bovine production will drop. Economic Impact Price market fluctuations in the short run can generate instability in Gross Margin. SPS does not reduce Gross Income but price variation can effect it. Impact on Rural Employment SPS leads to a clear reduction of family and extra family labour due to substitution of extensive farming activities to fodder crops and GPA aiming to reduce production costs.

13 I/O Analysis: Economic and Employment Effects Substantial variations among regions regarding the size of the same sector and the dynamics in terms of multiplier s size. Calls for flexibility in Pillar II measures Processing agriculture demonstrates high employment multipliers. Pillar II funds stimulate substantially the regional employment in terms of output, employment and household income. Pillar II reduces employment outflows, supports structural changes and counterbalance negative labour effects of Pillar I.

14 Employment multipliers (Rasmussen-Hirschman Linkage Coefficients) Emilia Romagna Anatoliki Makedonia and Thraki East Wales Kassel Östergötland Textiles (13) * (1) (63) (15) (47) Agriculture (23) (35) (1) (20) (46) Food products and beverages (3) (4) (3) (14) Coke refined petroleum products (28) (3) (4) Chemicals and chemical products (2) (13) (37) (4) (13) * in parentheses is the rank order of the sectors for each region

15 Total output, employment and household income impacts in the regions Output Employment Income million (%) persons (%) million (%) Scenario 2 Total effect * Emilia Romagna % % % Anatoliki Makedonia Thraki (-0.06%) -388 (-0.18%) (-0.03%) East Wales % % % Kassel % % % Östergötland % % % *in parentheses are the relevant shares compared to the regional total output, employment and household income.

16 Intersectoral distribution of output, income and employment impacts from the application of the RDP in the Greek region Output Income Employment (mn EURO) (%) (mn EURO) (%) (persons) (%) Rural Development Program (funds inflows million Euro) Primary % % % Secondary % % % Tertiary % % % TOTAL* % % % Shares (%) show the relevant contribution to the current regional total output, employment and household income. (RDP): Rural Development Program

17 Concluding Remarks Clear representation of the impacts of the reform on farming activities and on rural employment generation. Long-term consequences difficult to be evaluated exactly. Rural sector: move towards more competitive farm structure. less people employed in agriculture. pressure for further reforms and price signals from world markets.

18 Pillar I creates change in the mindset of farms production strategy of profit maximization Pillar II measures: Modest Highly bureaucratic Work better if combined with Pillar I Can mitigate any negative impacts from Pillar I Need to be more effective in less peripheral-less accessible territories. Certain sectors have the potential to enhance output, income and employment and therefore, policy promoting their expansion is indispensable

19 Policy Recommendations Policy actions coupled with Pillar II measures and structural funds spending may enhance rural employment. Modulation appears desirable to enhance rural development resources however views regarding transfer of funds seem polarized between agri-centric and multi-sectoral. Non-agro focused rural policies is an employment induced strategy. Complexities and diversities between and within regions require individualization and flexibility of Pillar II measures.