Econometric evaluation of CAP impacts in Germany

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Currently, the EU spends around 5 billion euro annually on decoupled direct payments to German farmers. In addition, agricultural policymakers have been increasingly relying on differentiated measures for ‘rural development’ which, besides supporting agricultural enterprises, should also assist environmental aims and strengthen rural areas in general. The aim of this subproject is to develop and apply regression models that analyze the effects of agricultural and rural development policies on the agricultural sector in German regions. Basing the analysis on territorial observation units allows the inclusion of instruments which are not directly aimed at farms, e.g. measures for village regeneration which are of particular importance in eastern Germany. The subproject draws on recent literature dealing with multiple and continuous policy effects in a panel data setting. Building on ongoing work from the first phase of this subproject, the primary focus will be on three extensions to existing models: (1) strengthening the microeconomic underpinnings related to CAP effects on farmers’ behavior, (2) explicitly considering dynamics of farm structures in the econometric models, (3) relaxing the linearity assumptions which are typically central to these models.