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The Impact of CAP Reform on the Employment Levels in Rural Areas

Final Report Summary - CARERA (The Impact of CAP Reform on the Employment Levels in Rural Areas)

The European Union Common Agricultural Policy (CAP) was widely reformed during the past fifteen years. In 2003 an innovative approach regarding the decoupling of farm subsidies and the modulation of the decoupled subsidies received by farmers was adopted, with significant impacts on regional economics. The CARERA project objective was to cast the effects of this reform on the economic structure of rural areas and particularly on employment through the provision of information about datasets and economic transactions, the development of an objective assessment on rural areas key features and the development of tools simulating the effects of changes on both the CAP and the rural development schemes.

Specific targets of the CARERA project were the following:
1. presentation of the state of the art related to rural development measures and the key issues when empirically addressing regional development programs;
2. provision of a detailed database of the rural economic sectors components including their transactions and interconnections;
3. empirical quantification of the structural changes of the farming sector as a result of the recent CAP reform;
4. analysis of the extent to which the reform would improve farmers' economic performance and thus competitiveness, which is directly linked to employment;
5. analysis of the existing rural development measures according to their potential of generating employment and provision of a quantitative assessment of the CAP reform on the rural areas income and employment, focusing on women and young people;
6. evaluation of the policy changes from the rural stakeholders point of view and of their effect upon rural employment generation;
7. provision of recommendations to policy makers on employment generating policy changes based on the project results.

The different CARERA activities were structured in eight interrelated work packages (WPs), in order to perform the required assessments and research, to develop the proposed tools and to disseminate the project results. The executed work resulted in the production of numerous deliverables, all of which were available in the project website, where conclusions and policy recommendations were also presented.

Given that there was no methodological approach which could offer a complete and reliable analysis, several approaches were employed to produce exploitable, realistic results. The economic transactions of regional economies were depicted by creating regional input-output models. Stakeholders were considered of major importance; thus their opinion and perceptions were taken into account throughout the project regardless of the outcome of the applied methodologies. Finally, all models developed as part of CARERA were applied in specific case studies to assess the effects of the CAP reform and to derive conclusions and recommendations.

The applied methodologies were the following:
1. positive mathematical programming (PMP) models for regions selection based on microeconomic approach;
2. a stochastic frontier model (SFA) for the evaluation of the CAP reform impacts on the farm units efficiency;
3. a hybrid regional input-output model, partially fed by the PMP model results, to assess the overall effects on rural employment and income considering regional economies;
4. an econometric model for choice experiments applied to farmers' future intentions, taking into account socioeconomic characteristics and based on large scale survey using questionnaires.

The employed approaches were evaluated by the scientific community as being scientifically robust and adequately innovative. An attempt was made so that the different models would form a solid analytical framework.

CARERA contributed significantly to the application of innovative approaches in the field of agricultural economics. Among its achievements was the completion of an extensive literature review related to the employed techniques and methodologies and the creation of a solid, interconnected framework incorporating the different applied models. In addition, most methodological approaches were developed and enhanced in comparison to the contemporary practices. The PMP model was expanded and combined with a regional model and its sectoral results were extrapolated to regional level. The SFA incorporated policy parameters and its results were compared among different countries. Finally, the econometric model was developed as a trivariate sequential model of tree decisions. The methodological improvements could be further applied via their use in future projects by PhD students who participated in the CARERA working team.

The produced knowledge was disseminated through the project website and the organisation of a targeted workshop and a short course accompanied by the creation and distribution of a project CD-ROM. Moreover, various meetings were held and reports focussing on knowledge dissemination were produced along with project leaflets in different languages, while all involved parts participated in conferences and published the project outcomes in scientific journals. Further dissemination activities were planned after the project completion.