Jobs and agricultural policy: Impact of the common agricultural policy on EU agricultural employment

This paper investigates the relationship between EU agricultural subsidies and the outflow of labor from agriculture. We use more representative subsidy indicators and a wider coverage (panel data from 210 EU regions over the period 2004-2014) than has been used before. The data allow to better correct for sample selection bias than previous empirical studies. We find that, on average, CAP subsidies reduce the outflow of labor from agriculture, but the effect is almost entirely due to decoupled Pillar I payments. Coupled Pillar I payments have no impact on reducing labor outflow from agriculture, i.e. on preserving jobs in agriculture. The impact of Pillar II is mixed. Our estimates predict that an increase of 10 percent of the CAP budget would prevent an extra 16,000 people from leaving the EU agriculture sector each year. A 10 percent decoupling would save 13,000 agricultural jobs each year. However, the budgetary costs are large. The estimated cost is more than € 300,000 per year (or more than € 25,000 per month) per job saved in agriculture.