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Employment effects of CAP payments in the UK non-farm economy

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  • Rizov, Marian
  • Davidova, Sophia
  • Bailey, Alastair

Abstract

This paper investigates the effects of the Common Agricultural Policy (CAP) payments on the indirectly generated non-farm jobs in small and medium-sized enterprises, which are central to job creation. It examines whether there are differences in the effect according to business location - rural or urban, the agricultural supply chain and according to CAP Pillars. A microeconomic approach is employed, based on firm data from FAME dataset combined with detailed subsidies information from Department of Environment, Food and Rural Affairs. The generalised method of moments (system GMM) is used to estimate the effect of CAP payments in both static and dynamic models of employment. The results suggest positive net spillovers of CAP payments to non-farm employment. Although the magnitude of the effect is small, it is economically significant. In general, Pillar 1 has a stronger positive employment effect relative to Pillar 2. However, Pillar 2 payments have a stronger positive effect per Euro spent in rural areas and within agricultural supply chain.

Suggested Citation

  • Rizov, Marian & Davidova, Sophia & Bailey, Alastair, 2018. "Employment effects of CAP payments in the UK non-farm economy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 45(5), pages 723-748.
    • Handle: RePEc:zbw:espost:184746
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    Cited by:

    1. Davidova, Sophia & Hennessy, Thia & Thomson, Ken, 2016. "Rural Jobs and the CAP: Spitting into the Wind?," 160th Seminar, December 1-2, 2016, Warsaw, Poland 249794, European Association of Agricultural Economists.
    2. Bojnec, Štefan & Fertő, Imre, 2022. "Do different types of Common Agricultural Policy subsidies promote farm employment?," Land Use Policy, Elsevier, vol. 112(C).
    3. Garrone, Maria & Emmers, Dorien & Olper, Alessandro & Swinnen, Johan, 2019. "Jobs and agricultural policy: Impact of the common agricultural policy on EU agricultural employment," Food Policy, Elsevier, vol. 87(C), pages 1-1.
    4. Unay-Gailhard, İlkay & Bojnec, Štefan, 2020. "Public support effect on natural disaster management: A case study of ice storms in forests in Slovenia," Land Use Policy, Elsevier, vol. 95(C).
    5. Pia Nilsson & Sofia Wixe, 2022. "Assessing long-term effects of CAP investment support on indicators of farm performance," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(4), pages 760-795.
    6. Hyytiä Nina, 2020. "Russian Food Import Ban – Impacts on Rural and Regional Development in Finland," European Countryside, Sciendo, vol. 12(4), pages 506-526, December.
    7. Lillemets, Jüri & Fertő, Imre & Viira, Ants-Hannes, 2022. "The socioeconomic impacts of the CAP: Systematic literature review," Land Use Policy, Elsevier, vol. 114(C).
    8. Zimmert, Franziska & Zorn, Alexander, 2021. "Direct payments and on-farm employment: evidence from a spatial regression discontinuity design," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317052, German Association of Agricultural Economists (GEWISOLA).

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    More about this item

    Keywords

    CAP; non-farm employment; SMEs; spillovers; rural–urban; system GMM;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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