Home Economics Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.
Assessing the impacts of modulation on farm income and farm household income is not straightforward. While Pillar 1 direct payments have a direct income effect, this is not the case for the majority of Pillar 2 measures, and so the degree to which Pillar 2 measures - those focused at the agricultural sector - are considered to have an income effect first needs to be established. Within this study, it has been assumed that expenditure under the LFA measures are pure income payments, that expenditure under human and physical capital measures has an income effect according to assumptions on investment rate returns, and that expenditure under the agri-environment measure is income-neutral.
In general, we assume that those farm types where Pillar 1 direct payments make up a high proportion of income are likely to experience a greater negative impact on overall farm incomes from reductions in Pillar 1 payments, and that this impact is likely to increase under the Health Check scenario as modulation rates increase. However, this impact should be mitigated to a certain extent by the additional availability of funds available through Pillar 2, which are augmented by additional national co-financing and private funds. The extent to which this takes place will depend on the ability of different farms to access funding from Pillar 2. It should also be noted that a proportion of funds will be redistributed away from the farming sector to non-farming beneficiaries.
Data on the impacts on modulation on farm incomes and farm household income has been calculated based on the FES (using FADN data), CAPRI and LEITAP models, and on information provided within the case study reports.
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