This article assesses the relationship between transfers arising from EU's Common Agricultural Policy (CAP) and convergence in both farmers’ revenues and interpersonal income redistribution using a sample of 26 regions in the state of Hesse, Germany, over the period 1979 to 2004
and 1991 to 2004, respectively. We thereby combine the concept of sigma convergence with Shorrock's inequality decomposition in order to determine the driving forces in distributional dynamics of farmers’ revenues. Additionally, we apply alternative methodologies to investigate how per
capita incomes have evolved over time. Explicitly comparing the situations with and without transfers, our results indicate that the CAP tends to smooth differences in farmers’ revenues across regions, but does not impede a strong divergence through time. The latter is mainly driven
by increasing structural differences between the regions, while disparities in intensity turn out to be less important. The empirical analysis also shows that CAP transfers reduce income inequality within society as a whole. However, this impact proved to be negligible in explaining distributional
dynamics and growth of per capita incomes.
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Document Type: Research Article
Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries, Bundesallee 5038116 Braunschweig, Germany
Institute of Agricultural Policy and Market Research, University of Giessen, Senckenbergstr. 335390 Giessen, Germany
Publication date: 2011-10-01
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