CoPS/IMPACT Working Paper Number G-211

Title: The regional economic consequences of Less Favoured Area support: a spatial general equilibrium analysis of the Polish LFA program

Authors: James Giesecke, Mark Horridge and Katarzyna Zawalinska


On accession to the EU, Poland, one of the most agricultural countries in the region, became eligible for the Common Agricultural Policy (CAP), which it perceived as a chance to develop its rural economy. However, in constructing its 2007-2013 Rural Development Programme, Poland directed the largest funding share to Less Favoured Areas (LFA) -- a controversial measure accused of poor targeting and ineffectiveness. In this paper, we analyse the spatial economic consequences of LFA support for all 16 NUTS2 regions in Poland using a regional computable general equilibrium model called POLTERM. We show that LFA support did help to increase farmers' incomes, but harmed export-oriented sectors and hindered structural change in the Polish economy.

JEL classification: C68, O18, O11, O21, Q18.

Please cite the later published version in:
'The consequences of LFA support: a multi-regional CGE analysis for Poland', Agricultural and Food Science, Vol. 22(2), 2013, pp. 272-287.

Keywords: Common Agricultural Policy Reform, Rural development, Less Favoured Areas, Spatial Computable General Equilibrium Model, Poland.

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