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Regional employment impacts of Common Agricultural Policy measures in Eastern Germany: a difference-in-differences approach

Authors

  • Martin Petrick,

    Corresponding author
    1. Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), Theodor-Lieser-Strasse 2, 06 120 Halle (Saale), Germany
      Corresponding author. Tel.: +49-345-2928120; fax: +49-345-2928199. E-mail address:petrick@iamo.de (M. Petrick).
      Data Appendix Available Online
      A data appendix to replicate main results is available in the online version of this article. Please note: Wiley-Blackwell is not responsible for the content or functionality of any supporting information supplied by the authors. Any queries (other than missing material) should be directed to the corresponding author for the article.
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  • Patrick Zier

    1. Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO), Theodor-Lieser-Strasse 2, 06 120 Halle (Saale), Germany
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Corresponding author. Tel.: +49-345-2928120; fax: +49-345-2928199. E-mail address:petrick@iamo.de (M. Petrick).
Data Appendix Available Online
A data appendix to replicate main results is available in the online version of this article. Please note: Wiley-Blackwell is not responsible for the content or functionality of any supporting information supplied by the authors. Any queries (other than missing material) should be directed to the corresponding author for the article.

Abstract

Politicians and farm lobbyists frequently use the argument that agricultural policy is necessary to safeguard jobs in agriculture. We explore whether this is true by conducting an econometric ex post evaluation of the European Union's Common Agricultural Policy (CAP) in the three East German States Brandenburg, Saxony, and Saxony-Anhalt. Whereas previous studies have employed descriptive statistics or qualitative methods and have looked at single policy instruments in isolation, we apply a difference-in-differences estimator to analyze the employment effects of the entire portfolio of CAP measures simultaneously. Based on panel data at the county level, we find that investment aids and transfers to less-favored areas had a zero marginal employment effect. We present evidence that full decoupling of direct payments in 2005 led to labor shedding, as it made transfer payments independent of factor allocation. Spending on modern technologies in processing and marketing and measures aimed at the development of rural areas led to job losses in agriculture. Agrienvironmental measures, on the other hand, kept labor-intensive technologies in production or induced them. This analysis calls into question whether an expansion of existing second pillar measures is a reasonable way to use funds modulated away from the first pillar.

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