Essays on welfare effects of European Union Common Agricultural Policy changes

This dissertation examines the economic effects of the Common Agricultural Policy (CAP) cereal regime practiced in Greece after its entry into the European Union, as well as of the CAP reform AGENDA 2000 and of policies recently proposed for future CAP reform. Greek cereals farmers can be divided into two groups: durum and soft wheat are substitutes in production for one set of Greek farmers, and thus their markets are horizontally linked and corn, cotton and sugar beets are substitutes in production for a separate group of farmers, and are horizontally linked. Additionally, the corn market is vertically linked with livestock markets since corn is the main input to livestock production. Because of these horizontal and vertical links, intervention in any one of these markets affects producers in the others. A methodology that allows measurement of the impact of simultaneous policy changes on income transfers to producers in horizontally and vertically linked markets is developed. This methodology involves the use of a line integral with a certain path of integration, which in turn can be measured by geometric areas behind supply curves in the pertinent markets. While the literature presents numerous welfare analyses of policy effects on single markets, welfare analysis in a multiple market setting is more complex. Furthermore, dynamic simulation is used to forecast welfare effects with a model that allows measurement of the impact of simultaneous policy changes in income transfers to producers. Finally, the dissertation demonstrates the use of a bootstrap resampling methodology to obtain standard errors and confidence intervals for the estimates of the income transfer.; Results suggest that the 1992 CAP reform has not reduced farm income. Rather income transfers stayed constant for Greek wheat farmers, while increasing for cotton, corn, sugar beet and livestock producers. The picture is somewhat different for the AGENDA 2000 reform, which lowered income transfers to all groups examined. A policy that could partially offset this result, at least for cotton, corn and sugar beet producers, would be an increase in the weight that is used in calculating the coresponsibility levy for cotton.