The Effects of the Reformed CAP on the Local Economy in Rural Areas

Abstract

The impacts of the 2004 CAP reform on crop allocation, agricultural production, and the rural economy have been scarcely studied within a regional perspective. In this work, the impact of the CAP reform—and in particular the implementation of cross-compliance—on the region of Eastern Macedonia and Thrace (Greece) is studied with the use of factor analysis and structural equation modeling. Detailed qualitative and quantitative data were obtained through structured questionnaires and in-depth interviews of agronomists working in the local agricultural inputs sector. Results demonstrate that the CAP reform had primarily an adverse impact on both crop allocation and production, as well as on the local economy.

Appendix

Code	Factor	Items	Loadings
Μ1	Product production	Decoupling of aids changes crop synthesis in the region	0.599
		Decoupling of aids results in the increase of non-cultivated land in the region	0.551
		Decoupling of aids results in the decrease of product quality	0.580
		Decoupling of aids provides a significant negotiating advantage to farmers	0.751
		Decoupling of aids results in the adjustment of farms in the conditions of free market and competition	0.830
		Decoupling of aids has negative impacts on the marketing and processing of products	0.578
		Decoupling of aids has been accepted by local farmers	0.721
Μ2	Output reduction	Decoupling of aids results in production decrease	0.542
Μ4	Human resources	Grant of aids launches the non-agricultural use of money, taking resources from the productive process of the farm	0.661
		Grant of aids reduces production	0.680
		Grant of aids reduces intensive farming that requires high inputs	0.758
		Grant of aids reduces farmers’ interest in risk taking	0.707
		Grant of aids is perceived as a non-farm social aid rather than as an agricultural community aid	0.650
		Grant of aids results in intense price fluctuations	0.645
Μ5	Farms	Grant of aids ensures conditions of stability and limited risk for farms	0.816
		Grant of aids results in better farm organization and programming	0.815
		Grant of aids results in better economic farm management	0.795
		Grant of aids results in attracting young farmers	0.636
		Grant of aids results in the increase of farm size	0.519
Μ6	Application accuracy	C–C was successfully applied to Greek farming	0.829
		C–C followed the necessary controls prior to implementation	0.888
		The relative bodies have been consistent regarding the announcement and implementation of C–C	0.863
		C–C appears to apply only to documents held concerning the CAP while they are not applied in practice	0.609
Μ7	Financial consequences	C–C has negative financial impacts in the short-term	0.887
		C–C has negative economic impacts on the farm	0.885
Μ8	Impact	C–C in the long-term has positive impacts on production and solving farm problems	0.838
		The implementation of C–C by some producers causes unfair competition and comparative disadvantage	0.600
		The non-implementation of C–C may result in the imposition of sanctions on our country by the EU	0.701
Μ9	Farm income from winter cereals	Durum wheat	0.942
		Soft wheat	0.867
		Barley	0.766
Μ10	Farm income from summer cereals	Corn	0.658
		Rice	0.964
Μ12	Cereals market bodies	Participation of NDP in collection and trade of cereals has fallen over the last eight years	0.934
		Participation of private traders in the collection and trading of cereals has increased over the last eight years	0.922
Μ13	Marketing practices	A significant number of farmers store the cereals they produce and market their own in times of higher demand	0.626
		Farmers in the region try to produce the quantities they need on their own farms	0.854
		There is evidence of ‘concerted practices’ among cereal merchants	0.608
Μ14	Marketing problems	The involvement of a large number of cereal traders in the region negatively affects “economies of scale”	0.503
Μ15	Climate impact	Climate change affects the production and quality of winter cereals	0.874
Μ45	Areas in dependence on agriculture	Diffusion of impacts of the CAP on other sectors of the local economy related to product processing	0.823
		Diffusion of impacts of the CAP on other sectors of the local economy concerned manufacturing	0.778
		Diffusion of impacts of the CAP on other sectors of the local economy related to product transfer	0.781
		Diffusion of impacts of the CAP on other sectors of the local economy concerned manufacture of packaging materials	0.892
		Diffusion of impacts of the CAP on other sectors of the local economy related to labour	0.801
		Diffusion of impacts of the CAP on other sectors of the local economy related to construction of storage infrastructure	0.668
Μ46	Broader sectors	Diffusion of impacts of the CAP on other sectors of the local economy covered the market of agricultural machinery, accessories etc.	0.553
		Diffusion of impacts of the CAP on other sectors of the local economy related to consumption	0.778
		Diffusion of impacts of the CAP on other sectors of the local economy covered standard of living	0.882
		Diffusion of impacts of the CAP on other sectors of the local economy related to construction activity in the area	0.742
Μ47	Land value	Diffusion of impacts of the CAP on other sectors of the local economy related to land purchase	0.772
		Diffusion of impacts of the CAP on other sectors of the local economy covered land rental	0.874