Garrone, Maria Emmers, Dorien Olper, Alessandro Swinnen, Johan F. M.
Year of Publication:
LICOS Discussion Paper No. 404
Katholieke Universiteit Leuven, LICOS Centre for Institutions and Economic Performance, Leuven
This paper investigates the relationship between EU agricultural subsidies and the outflow of labor from agriculture. We use more representative subsidy indicators and a wider coverage (panel data from 210 EU regions over the period 2004-2014) than has been used before. The data allow to better correct for sample selection bias than previous empirical studies. We find that, on average, CAP subsidies reduce the outflow of labor from agriculture, but the effect is almost entirely due to decoupled Pillar I payments and the impact of Pillar II is mixed. Coupled Pillar I payments have no impact on reducing labor outflow from agriculture, i.e. on preserving jobs in agriculture. The impact of Pillar II is mixed. Our estimates predicts that a decline of 10 percent of the CAP budget would cause an extra 16,000 people to leave the EU agriculture each year. A 10 percent decoupling would save 13,000 agriculture jobs each year.
Agricultural employment off-farm migration panel data analysis